Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — TRANSPORT

Cycle Paths

Dr. Goodson-Wickes: To ask the Secretary of State for Transport what recent consultations he has had over the routing of cycle paths within London. [15688]

The Minister for Transport in London (Mr. Steve Norris): My Department attends regular meetings with London borough councils and representatives of cycling groups to discuss development of the 1,200 mile London cycle network.

Dr. Goodson-Wickes: Admirable though it certainly is to provide and extend cycling facilities in London, is it not absolute nonsense in a Labour-controlled borough such as mine for more than £300,000 to be spent on a new track which has brought chaos to residents, car drivers and bus drivers, dismay to the police and, above all, danger to cyclists? Should not Merton council have ensured proper consultation and worked towards practical pedalling rather than posture politics?

Mr. Norris: My hon. Friend forwarded to me correspondence from Councillor Margaret Brierly, who expressed on behalf of residents in Raynes Park in my hon. Friend's constituency concern about the way in which that particular part of the cycle route had been implemented. The case underlines the fact that, however desirable cycling may be—I am grateful for my hon. Friend's endorsement of the principle—it is vital that local authorities proceed on the basis of proper consultation with residents so that we get sensible value for money out of the exercise.

Airline Subsidies

Mr. Duncan Smith: To ask the Secretary of State for Transport if he will make a statement on the amount of subsidy from national Governments to their national airlines within the EC; and if he will list the latest available figures for each member state. [15690]

The Secretary of State for Transport (Dr. Brian Mawhinney): Since 1991, the European Commission has approved £5.3 billion of state aid from member states to their national airlines. Almost half this aid was awarded to Air France. The UK Government have opposed all these subsidies.

Mr. Duncan Smith: Does my right hon. Friend agree that that figure is outrageous, not least because half of it goes to one airline? Will he undertake to publish the

details of the subsidies to every other airline in Europe? Does he agree that, apart from being worried about the record of fraud and mismanagement that go on in the Community, many people in Britain will be dismayed to think that others whose livelihoods and jobs depend on the free market which we are supposed to have joined will seriously question the purpose of what they are in unless that free market is established?

Dr. Mawhinney: My hon. Friend will be interested to know that, since 1991, Sabena has received £450 million, Iberia almost £600 million, Aer Lingus £170 million, TAP of Portugal £710 million, Olympic Airways about £1 billion and Air France about £2.4 billion. All that distorts the single market, as my hon. Friend says. All of it is unfair to British Airways and other British carriers, which compete without the benefit of state aid and do so much more effectively than most of the airlines that receive state aid. It is also unfair to the passengers. For all those reasons, the Government have opposed all those state aids. I assure my hon. Friend that I will continue to be robust in the future, as we have been in the past.

Railways, London

Mr. Corbyn: To ask the Secretary of State for Transport what plans he has to promote greater usage of London's surface railways. [15691]

The Minister for Railways and Roads (Mr. John Watts): In London, as elsewhere, giving the private sector the opportunity to operate existing services and introduce new ones is the best way to bring about the further improvements to services which passengers clearly want to see and to attract more passengers.

Mr. Corbyn: Does the Minister not recognise that imaginative management of London's railways would provide far greater passenger opportunities on many underused freight lines or underused passenger lines, such as the Barking to Gospel Oak line? Is he aware that the principles of the internal market mean that, to save Railtrack from paying penalties, re-routed freight trains are sent down the Barking to Gospel Oak line, passenger trains are cancelled and passengers are taken off the trains and told to take a bus? Railtrack does not therefore lose any money from its freight income, but it inconveniences the passengers, who receive no compensation because that line is not included in the compensation package.

Mr. Watts: No doubt the hon. Gentleman will welcome the fact that £300,000 has been contributed towards refurbishment of stations on the Gospel Oak to Barking line. As for rail freight, he will be pleased to learn that the freight companies were vested successfully this weekend. I believe that in the private sector they will offer greater innovation and better marketing and secure an increasing share of traffic for rail freight at the expense of road freight.

Mr. Harry Greenway: I recently travelled from West Ealing to Greenford and back using British Rail. Many passengers travelling in both directions to whom I spoke said that the service was extremely good and comfortable. Will my hon. Friend make absolutely sure, however, that the service from Ealing to Paddington is maintained at all times?

Mr. Watts: The franchise for the Thames services is not in the first eight, but I am pleased to hear what my


hon. Friend's constituents think. I am sure that he shares my confidence that, as franchises are offered in the private sector, we can expect improvements in the standard even of those services that people already find satisfactory.

Mr. Meacher: Is it not clear that, although the Government have a so-called national roads programme, they have no national rail programme whatever—unlike every other major European country? When will the Minister understand that the private sector will not stump up capital for either crossrail or Thameslink 2000 until the Government give a lead by being prepared to invest public money in them?
Is it not also clear that the Minister has been forced to cut the roads programme, but he is still not prepared to invest in alternative public transport systems because the Tory party retains a deep visceral hostility to investment in the public sector?

Mr. Watts: Railtrack has oversight of the entire rail network, rather as the Highways Agency has oversight of the trunk road and motorway network.
I note the hon. Gentleman's scepticism about Thameslink—a scepticism that I do not expect to be borne out by the results of the feasibility study conducted recently by Railtrack and British Rail. The hon. Gentleman is so welded—I mean wedded—[Laughter.] That was a slip of the tongue, but perhaps my tongue found a better word. The hon. Gentleman is welded to the idea that nothing is worth while unless it is subsidised by the taxpayer. He seems to ignore the great successes of the private finance initiative, which is delivering more important rail and other transport infrastructure than the public purse could ever deliver. He continually wishes to place further burdens on taxpayers, rather than using the skills and finance of the private sector.

Dr. Twinn: I thank the Government for their commitment to London's surface railways. Is my hon. Friend aware that in constituencies such as mine, in Enfield and Edmonton, surface rail is very important because we have no tube services? Does he agree that private investment in British Rail provides the best opportunity of guaranteeing an improved service for my constituents in the future?

Mr. Watts: I entirely agree that opening up rail services to investment and management by the private sector provides the best guarantee of improved services well into the future.

Railway Works Compensation

Mr. Simon Hughes: To ask the Secretary of State for Transport what consideration his Department has given to proposing changes to the laws on compensation for people and businesses affected by (a) underground and (b) overground railway works; and if he will make a statement. [15693]

Mr. Watts: The relevant legislative framework—which was most recently extended by the Planning and Compensation Act 1991—is kept under review.

Mr. Hughes: When the review is next considered—and the matter is urgent—will the Minister take account of two specific problems? They arise from the Jubilee line works, welcome though those are.
First, a change of plan has meant that people who invested on the basis of an undertaking that they would not suffer disruption have suffered such disruption. Secondly, and more important, some small businesses—such as those in Borough high street, by London bridge—are on the verge of bankruptcy, not because of a reduction in the value of their premises but because the works surrounding them have caused trade almost to disappear. Will the Minister examine the problem as a matter of urgency? It is affecting many businesses and individuals.

Mr. Watts: As the hon. Gentleman will realise, compensation arrangements for particular schemes such as the Jubilee line extension are a matter for discussion between London Transport and those who consider that they have been adversely affected. I understand that some traders are negotiating with London Transport about compensation in connection with the construction works, and I am sure that that is the right way for them to proceed. My hon. Friend the Minister for Transport in London is present, and has heard what the hon. Gentleman has said.

Mr. Brooke: Given that all the new underground routes planned pass through the constituency of City of London and Westminster, South and as those who are sited above them, either commercially or residentially, suffer blight in general and personal disruption in particular, will my hon. Friend bear constantly in mind the fact that the routes of those lines are more likely to be smooth if there is a sensible system of compensation that everyone recognises?

Mr. Watts: Yes, Madam Speaker.

Mr. Gerrard: Will the Minister consider the position of people who are faced with compulsory purchase and who have negative equity on their properties, particularly commercial properties? Such people are forced to sell their properties at a time when, given the opportunity, they would not have sold but would have waited so as to recover their investment. Will the hon. Gentleman look at that serious problem?

Mr. Watts: Yes. The hon. Gentleman raises a difficult point which we will look at sympathetically when there is a further review.

Mr. Dunn: Will my hon. Friend please consider extending compensation to farmers and market gardeners in Kent whose crops will be damaged and visually destroyed by chalk dust emanating from the construction of the channel tunnel rail link?

Mr. Watts: I am sure that my hon. Friend's constituents who feel that they may be so affected will make full use of the statutory provisions available to them.

Car Safety

Mr. Sutcliffe: To ask the Secretary of State for Transport if he will make it his policy to ensure that standards higher than the European Union crash standards for cars are promptly introduced. [15695]

Mr. Norris: No. It is vital that crash test standards are set within the context of the European Union.

Mr. Sutcliffe: Does the Minister not realise that more improved, stringent tests could save up to 90,000 lives


across Europe and 9,000 lives in the United Kingdom and that the motoring organisations are concerned about the recommendations being too loose?

Mr. Norris: The hon. Gentleman is right. When we reach the stage 2 standards, they will offer the prospect of substantial life saving. Of course these test standards have to be introduced on a sensible time scale which allows the manufacturers to develop products that are set to the stringent standards. I underline that I think there is general agreement throughout the House that the construction standards must be properly set within the framework of the European Union. They offer British manufacturers the opportunity of knowing the standard to which they build so that they can sell their products throughout the Union.

Commuter Trains

Mrs. Angela Knight: To ask the Secretary of State for Transport what proposals he has to increase the number of regional commuter train services. [15696]

Dr. Mawhinney: Privatisation can be expected to bring improvements to regional commuter train services as well as to passenger services generally. The Government also welcome the support that local authorities have given to developing local services in their areas.

Mrs. Knight: My right hon. Friend will be aware that among the proposals of the Greater Nottingham rail strategy is one for a line that crosses the county boundary into Derbyshire and for additional small commuter stations at Ilkeston, Sandiacre and Long Eaton in my constituency. What action can his Department take to forward that proposal, as it utilises better the existing midland main railway line, to the benefit of commuters?

Dr. Mawhinney: Yes, I am aware of the proposal and of my hon. Friend's support for it. Any application to the Department for funding would need to be accompanied by a full appraisal that demonstrates that the scheme would provide value for money and better prospects for relieving traffic congestion, perhaps by encouraging transfer from private cars, rather than having, say, an express bus service. We are open to such a proposal and would look carefully at it should it emerge.

Mr. Dalyell: Will the Secretary of State reflect on what would happen to commuter services into Edinburgh from Dunfermline and Kirkcaldy if rust were to take hold on the Forth bridge? If that happened, one impregnated lattice structure would make it impossible to use that bridge, which is vital to the area north of the Forth. It is also the greatest monument to British engineering of the 19th century and is the picture postcard image of Britain. What are the Secretary of State's responsibilities in this matter?

Dr. Mawhinney: Certainly, the hon. Gentleman is right. I share his appreciation of the engineering feat that the bridge represents. It was part of the best of 19th century engineering in Britain. I have no reason to believe that any of the hon. Gentleman's concerns are well founded. As he will recall from evidence that I gave to the Select Committee on Transport, we are asking some experts to have another look at the bridge.

Mr. Rowe: My right hon. Friend will know that the chairman of one of the main banks has said that he

expects there to be 50,000 redundancies in the banking world. There has been a host of similar developments during recent years. Will my right hon. Friend share with the House, either now or on a subsequent occasion, the Government's latest thinking on the effect that technological change will have on commuter patterns over the next few years?

Dr. Mawhinney: First, I have no responsibility for banks. Secondly, the technological change to which my hon. Friend referred will not happen just in the future; it is happening now and it is being reflected in our policies as we seek to develop the railway industry in the private sector and to make the best use of developing technology in this country's other transport infrastructure.

Rail Modernisation

Mr. Jim Cunningham: To ask the Secretary of State for Transport how long Railtrack's feasibility study team has been analysing whether to modernise the rail network. [15697]

Mr. Watts: At any time, Railtrack will be assessing the merits of a range of investment projects.

Mr. Cunningham: Given the shambles since November on the Euston-Coventry-Birmingham line, and in view of what happened today, will the Minister give an undertaking that he will speed up the modernisation proposals, that he will investigate what has been happening on that line since November and that he will abandon the privatisation proposals? Although the staff give of their best, they are demoralised by the privatisation proposals and, consequently, the railway line between Euston and Birmingham is a shambles.

Mr. Watts: The hon. Gentleman's comments about the effects of privatisation are total rubbish. However, I shall reflect on what he has said about the problems on the line to which he referred.

Sir Patrick Cormack: Will my hon. Friend ensure that there is an urgent examination of the west coast main line? Is he aware that many of us would like to use it regularly but do not because it is so unreliable? I happened to use it this morning for the first time in months and I was delayed by two hours. There was total chaos. It is a wholly unacceptable position.

Mr. Watts: My hon. Friend will be pleased to know that the upgrading of the west coast main line is probably the biggest of the upgrading projects being considered. The first phase project study was completed in December. A couple of weeks ago, I announced that the Government had given approval for the letting of the contract for the development of a new signalling system, which is at the heart of the upgrading proposals. The release of funds that will follow will provide funding for the core investment programme that the line most urgently requires.

Mr. Tyler: Is the Minister aware that whenever Members of Parliament raise questions about services at risk, especially services to the peripheral, more remote areas—for example, sleeper services—Railtrack or the franchising director says that their future is a political decision? Does the hon. Gentleman accept that the buck must eventually stop with the Department of Transport in respect of those services and the costings on which their future is to be based?
Does the Minister agree with the announcement by the director of Railtrack Scotland that should the sleeper services be axed in any part of the country, that would reflect badly on and tarnish the privatisation exercise?

Mr. Watts: The hon. Gentleman should stop arousing unnecessary fears in the minds of his constituents and those of hon. Members who represent Scotland. He well knows that sleeper services to the west country and to Scotland will be safeguarded, for the very first time, by their inclusion in passenger service requirements.

Mr. John Marshall: Will my hon. Friend remind those scaremongers who complain about the potential consequences of privatisation that wherever industry has been privatised, that has resulted in much greater investment and much better quality of service? That will be as true with the railways as it is elsewhere.

Mr. Watts: Yes, indeed. My right hon. Friend the Secretary of State referred earlier to the contrast between British Airways in the private sector and the nationalised airlines of some of our continental partners.

Mr. Meacher: Does it not show the Government's priorities that they still refuse to fund a penny of the £1 billion required for the desperately needed modernisation of the west coast main line, while at the same time they are quite prepared to shell out £5 billion sweeteners in debt write-offs and capital allowances to ease the privatisation of the railways? Is it not absolutely clear that the Government are far more interested in funding their dogma than in providing higher-quality services for passengers?

Mr. Watts: What it shows is that the hon. Gentleman does not think that any investment is worth while unless it is paid for by taxpayers. The first stage of the upgrading of the west coast main line can be funded in the private sector, so I find no reason why he continues to argue that taxpayers should pay for the upgrading. It can be funded without dipping into taxpayers' pockets.

Airspace Restrictions

Mr. Steen: To ask the Secretary of State for Transport what assessment he has made of the use by EU countries of restricting airspace as a means of restricting competition. [15698]

Dr. Mawhinney: It is the Government's policy to oppose any measure that unduly restricts competition in the air transport single market.

Mr. Steen: When British Midland was given enough slots to become the second British carrier to fly to Paris, Amsterdam and Brussels, fares dropped by about a third and the percentage share of passengers using those services went up from about 40 to 60 per cent. Will the Minister therefore consider using, if not public money, then money raised from the private sector, to invest in the necessary technology to provide new and additional slots out of London? In that way, additional British carriers could fly on the other trunk routes—which have only British Airways here and the state airline at the other end in Europe—and so provide increased competition and reduced fare prices to the consumer.

Dr. Mawhinney: If my hon. Friend is talking about flights in Europe, he will be pleased to remember that the

1993 liberalisation package, behind which we were a major moving force, has provided opportunities precisely to enable greater competition and greater access for British carriers to the transfer of passengers in other European countries. If he is talking about services beyond Europe, I assure him that, as we pursue bilateral liberalisation arrangements with other countries, we always seek to enhance British carriers' prospects.

Mr. Stevenson: Does not the Secretary of State agree that one of the greatest restrictions on airspace is its reservation for military use both in this country and in the European Union? Does that not restrict commercial carriers in obtaining the additional slots that they require? Has he assessed that position recently? If he has, will he advise us on the outcome of that assessment? If he has not, is he about to assess the position?

Dr. Mawhinney: There we go again: anything to reduce the country's defence capabilities finds an echo on the Labour Benches. But perhaps that is not surprising from the party that has just brought forward a new rewording of clause IV, which inadvertently happened to omit NATO from its words.

Air Services

Mr. Spring: To ask Secretary of State for Transport what efforts are being made to liberalise air services to and from the United Kingdom. [15699]

Dr. Mawhinney: The United Kingdom played a lead role in bringing about the liberalisation of air services in the European Community, which came into effect on 1 January 1993, and about which I have just spoken. Outside the Community, we shall continue to seek to liberalise air service agreements on a bilateral basis.

Mr. Spring: Although I welcome the discussions between the UK and the United States of America, does my right hon. Friend hope that new practical and liberalised arrangements will emerge that are of benefit to both countries?

Dr. Mawhinney: I appreciate my hon. Friend's question and I am encouraged by the progress that has been made in those discussions between the United States and the UK. I pay tribute to Secretary Peña who, with me, agreed an agenda for those discussions. We have made good progress. They have been genuine negotiations. The talks will recommence in Washington on 10 April and continue until 12 April. I am hopeful that an arrangement will eventually emerge that will benefit the travelling public both in the United States and in the UK.

Channel Tunnel Rail Link

Mr. Timms: To ask the Secretary of State for Transport what is his policy in respect of the objective for the channel tunnel rail link announced by the former Secretary of State in 1991, with special reference to economic regeneration in east London. [15700]

Mr. Watts: In selecting the easterly route for the channel tunnel rail link, the Government recognised the potential that it offered to encourage regeneration in the


east Thames corridor, now known as the Thames gateway. Such regeneration remains an important objective for the rail link project.

Mr. Timms: May I remind the Minister that when the former Secretary of State made the announcement in 1991, he was explicit that his commitment was to regeneration in east London, where it is most needed and where, as the Government's own figures confirm, the levels of urban deprivation are highest? Do the Government remain committed to regeneration specifically in east London, as announced in 1991, through the rail link project?

Mr. Watts: I am confident that the whole of the Thames gateway will benefit from the rail link project. I was grateful to the hon. Gentleman for inviting me to view the proposed site of the Stratford station, which I did recently on a very wet day—it was probably the only time that anyone has described me as a wet. However, the enthusiasm of the promoter group was undiminished by the weather. As the hon. Gentleman knows, the question of the station at Stratford is still open and we shall reassess it in the light of the bids from the four consortiums, which are undergoing assessment.

Mr. Jacques Arnold: May I remind my hon. Friend that the reference was to the east Thames corridor and that we in north-west Kent are therefore grateful for the decision immediately to proceed with the Ebbsfleet station, which will bring considerable regeneration and also make more viable any opportunities that Opposition Members see in respect of east London?

Mr. Watts: It is gratifying that hon. Friends and hon. Members representing both sides of the Thames recognise the value of this project to regeneration prospects.

Cyclists and Pedestrians

Mrs. Anne Campbell: To ask the Secretary of State for Transport what steps he will take to improve provision for cyclists and pedestrians. [15701]

Mr. Norris: The responsibility for making safe provision for cyclists and pedestrians rests principally with local highway authorities. They are able to bid for appropriate funding in their annual transport policies and programmes submission to the Department of Transport.

Mrs. Campbell: Is the Minister aware that three quarters of all journeys are less than five miles long and that, at present, only 1 per cent. of them are made by bicycle? What is he doing to ensure safe networks on which parents are prepared to let their children travel and to encourage more people to cycle?

Mr. Norris: The hon. Lady is right, although it is about 2.5 per cent. of all journeys in this country that are made by cycle. That compares with an average throughout Europe of about 15 per cent. Although our road safety record generally is excellent, the prospects of being injured as a cyclist are substantially higher in this country than in some countries where cycling is more central to local transport provision. The hon. Lady is on to a very good point which I have strongly endorsed myself. The mechanisms for delivering what she seeks are the TPP submissions from local authorities which are being guided by the Department in its transport supplementary grant

guidance to ensure that, when packages are put together by local authorities, they include a significant cycling element.

Mr. Robathan: I am delighted that my hon. Friend supports cycling, but will he hold discussions with his colleagues at the Department of Health and the Department for Education to encourage schoolchildren to bicycle or walk to school? We are told that children are getting fat and unfit because they sit on their backsides too much and do not take exercise; we are told that they are getting unhealthy and developing asthma because of air pollution; and we can all see the congestion for ourselves. This is a very serious issue, and I hope that my hon. Friend will respond accordingly.

Mr. Norris: My hon. Friend is right. Cycling is environmentally sound and healthy and it is a thoroughly desirable form of transport, but most people would not exactly relish the prospect of challenging a 40 ft articulated lorry for priority on the road. The reality is that we have to create conditions in which thoroughly un-lycra people such as me might be tempted to improve their health substantially by cycling. My hon. Friend's enthusiasm is legendary and much to be welcomed.

Manchester Airport

Mr. Thurnham: To ask the Secretary of State for Transport what representations he has received about the future ownership and funding of Manchester airport; and if he will make a statement. [15702]

Dr. Mawhinney: I have received a number of representations about the future ownership and funding of Manchester airport from hon. Friends and others. I believe that the airport's future would be better served in the private sector.

Mr. Thurnham: Does my right hon. Friend agree that local authorities should allow pension funds to pay for tarmacking the second runway at Manchester airport so that councils are free to spend more on schools and caring for the vulnerable?

Dr. Mawhinney: My hon. Friend will understand that I am not in a position to comment about the second runway for obvious reasons, but I strongly endorse his view that the flexibility and investment that Manchester airport needs and of which, on the basis of its past history, it could make good use, is much more likely to come effectively from the private sector, thereby freeing up resources for the council to use in other ways as my hon. Friend pointed out.

Mrs. Dunwoody: I think that the Secretary of State made a mistake because Manchester is a highly efficient airport, which is growing every year and is not only providing high-quality management but contributing to the very best in the region. I thought that the Secretary of State was in the business of trying to sell off those broken-down bits of British Rail that his friends want for other reasons.

Dr. Mawhinney: I am happy to confirm that Manchester is indeed a good airport, but I believe that it can be even better—and it is much more likely to be better and to provide the increasing range of international services that people want if it is given the opportunity to


be in the private sector. I point the hon. Lady to the British Airports Authority. No doubt when the Airports Bill was going through the House she was against that as well.

Mr. Fabricant: While I agree with the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) that Manchester airport is very efficient—I often fly there and enjoy the facilities—does my right hon. Friend agree with the comments made by Samuel Goldwyn junior when the Select Committee on National Heritage visited him in Los Angeles in a very unpublicised trip last year, when he said that public subsidies make for lazy film-makers? Is that not also the case with airports?

Dr. Mawhinney: I am pleased that we have agreement across the Floor of the House that Manchester is a good airport. I think that we also have agreement across the House that it can be an even better and more significant airport. Unquestionably, that will happen if it gets into the private sector. I hope that that decision will be taken locally because I am sure that that is the best place for it to be taken, but I would not rule out the possibility that that decision might have to be taken centrally at some time in the future, on the basis of legislation.

Mr. Bennett: Does the Secretary of State accept that Manchester airport's success is due to the fact that for 50 years it has been an example of municipal enterprise and that politicians of all political parties in Greater Manchester have nurtured it and built it up? Having achieved such a success, which even the Minister concedes, why spoil it now by taking it away from the local authorities?

Dr. Mawhinney: It is encouraging to know that the Labour party, despite all its warm words and clich's, has not changed its instinct for the public sector over the private sector, irrespective of the benefits that the latter can provide. We have heard that view from the Front-Bench spokesman, the hon. Member for Oldham, West (Mr. Meacher), and from the hon. Member for Denton and Reddish (Mr. Bennett) on the Back Bench. All we need now is for it to be confirmed by the Leader of the Opposition and we shall have a clean slate.

Roads (Environmental Impact)

Mr. William O'Brien: To ask the Secretary of State for Transport if he will make a statement on progress to reduce the environmental impact of road transport. [15703]

Dr. Mawhinney: A wide range of measures has been introduced to reduce the environmental impact of road transport, within the Government's overall aim of sustainable development.

Mr. O'Brien: Will the Secretary of State confirm that included in that statement there is a genuine interest on the part of Government to reduce the development of asthma in children and in the population in general? Will he give an assurance that new motorways will not be built near infant and junior schools? Does he agree that there has to be a distance of half a mile, or a mile, between a motorway and a school to ensure the health and safety of children in our schools?

Dr. Mawhinney: I understand the importance that the hon. Gentleman attaches to clean air. I hope that he will accept that, in the nine months that I have been in this

job, I have tightened vehicle emission standards on two occasions and have paid particular attention to putting in place arrangements that will add to those already in place as regards cleaning the air. As to new roads, I understand that the hon. Gentleman has a genuine concern about the A1 (M) and proposals for new routes, the effect that those might have on the Ferrybridge-Pontefract corridor and whether the route ought to go to the east of Knottingley. He will appreciate that a variety of issues have to be taken into account in making such a judgment. He has made one of those points very eloquently today. I hope that he will accept that a number of others have to be borne in mind before a final decision is reached.

Mr. James Hill: Does my right hon. Friend agree that the M3 has been an outstanding success, as its use by the public has cut out many huge traffic jams of the past? None the less, the environmental side needs some attention. As a result of the sheer construction of the gap, almost 1,000 contractors' caravans are still in place. Should not a little environmental detail now be approached to make the M3 a real success?

Dr. Mawhinney: I agree with my hon. Friend that the M3 and the whole motorway network have been a success. Some motorways have been a little controversial at the time of construction but, as people reflect on what we now have in place, they agree that the system is to the great advantage of the travelling public, business and industry. I hear what my hon. Friend says about the environmental aspects of the M3 and I will report his concern to the Highways Agency.

Ms Walley: In view of the measures which the Secretary of State says are so important, when will he take full account of the report of the Standing Advisory Committee on Trunk Road Assessment and the report of the royal commission? When will environmental appraisal be at the root of all road schemes and transport policies? When will he introduce air quality monitoring, both nationally and as a requirement for local authorities?

Dr. Mawhinney: I should have hoped that the hon. Lady would know that, since 1985, environmental assessments have been at the heart of decisions on whether new roads should be built. The SACTRA report made it clear that induced traffic consequences of road building happen only on some roads but could not say in advance which roads those would be. It recommended that we should do more research to pursue that matter further and I am happy to tell the hon. Lady that we shall do so.

Oral Answers to Questions — PUBLIC ACCOUNTS COMMISSION

National Audit Office

Mr. John Marshall: To ask the Chairman of the Public Accounts Commission how many economists are employed by the National Audit Office. [15738]

Sir Peter Hordern (Chairman of the Public Accounts Commission): The National Audit Office employs some 550 staff, who either have accountancy qualifications or are training for them. Of those, 60 have degrees in economics, although none are full-time professional


economists. The office conducts a wide range of studies. When specialised advice is needed on relevant economic issues, the NAO uses external experts.

Mr. Marshall: Will my right hon. Friend ask one of those highly trained individuals to discover why we have computer-readable passports but inadequate computers at ports of entry?

Sir Peter Hordern: I am familiar with the report to which my hon. Friend refers and I understand that the Public Accounts Commission has already considered it. It shows the good work which the National Audit Office does for the House and for Parliament generally in inquiring into administration rather than policy. It has also revealed that the index of suspects, which has some 340,000 names on it, is held in a manual that is updated by hand every day. It is hoped to move to a computer index soon, though some hon. Members may consider that that should have been done before.

Oral Answers to Questions — TRANSPORT

Airline Subsidies

Mr. Waterson: To ask the Secretary of State for Transport what steps he is taking within the EU to resist the payment of illicit subsidies to (a) Air France, (b) Iberia and (c) Olympic Airlines. [15704]

Mr. Norris: The UK has opposed the granting of state aid by national Governments to Air France, Iberia and Olympic Airlines, and we have applied to the European Court of Justice to annul the Air France decision.

Mr. Waterson: Will my hon. Friend take an early opportunity to remind his opposite numbers in Europe that, to use Lord King's words, within less than a decade British Airways went from awful to awesome as a result of privatisation, cutting overmanning and achieving more efficient management, and that if their national airlines cannot achieve that without massive subsidies they should be allowed to go out of business?

Mr. Norris: I listened closely to what my hon. Friend said and I think that his words will resonate throughout the House and outside. State aid merely shores up inefficiency, distorts competition and undermines European airlines' ability to compete in world markets.

Channel Tunnel Rail Link

Mr. Gordon Prentice: To ask the Secretary of State for Transport what estimates he has made of the public subsidy likely to be required to (a) construct the channel tunnel rail link and (b) operate services on it. [15710]

Mr. Watts: The level of public sector support for the construction of the channel tunnel rail link will be determined by the competition currently under way to select a private sector promoter for the rail link. The Government do not intend to subsidise the private sector operation of international services.

Mr. Prentice: Is the Minister aware that Eurorail, whose chairman is Lord Parkinson, has put in a bid to construct the rail link? Is that not strange and remarkable

behaviour from the noble Lord, given that he spiked the project five years ago, when he said that it should receive no public subsidy whatever?

Mr. Watts: I do not find it in the least strange that any one of the four consortiums should have put in bids to build the link.

Mr. Jacques Arnold: Bearing in mind the fact that the north Kent line is subsidised, along with the other commuter services in the London area, is not one advantage of the channel tunnel rail link that it will cut commuting speeds from Gravesend from 50 minutes to 19 minutes on the high-speed rail link?

Mr. Watts: My hon. Friend has pointed out one of the important domestic benefits that flow from the construction of that link.

Oral Answers to Questions — HOUSE OF COMMONS

Visitors' Refreshment Facilities

Mrs. Anne Campbell: To ask the Chairman of the Finance and Services Committee what plans he has to make refreshment facilities available for visitors. [15718]

Mr. Paul Channon (Chairman of the Finance and Services Committee): In its first report of 1992–93, "Refreshment Provision for Line of Route Visitors", the Catering Committee recommended that the area currently occupied by the Westminster Hall cafeteria should he converted to a visitor centre, but that that should take place only when a suitable alternative has been found for the present lunchtime users of that cafeteria. The House agreed the report on 12 July 1994.

Mrs. Campbell: I thank the Chairman of the Finance and Services Committee for that reply. I am glad to hear that some progress has been made. Is he confident that when I am visited by children in the future, as I was recently by 80 children from Arbury county primary school of Cambridge, those children will be able to sit and eat their sandwiches inside instead of having to go outside and eat them in the rain?

Mr. Channon: I entirely agree that that is very much to be desired. The Director of Works is currently preparing design options, which will have to be considered by the various Committees of the House. The serious problem is that between 400 and 450 people already have meals in the Westminster Hall cafeteria. Some suitable alternative must be found for them before much else can be done.

Mr. Dunn: As one of the bars to extending facilities in the House is the lack of space, is my right hon. Friend aware that a number of rooms are currently used by policy advisers to the Labour party and are therefore now redundant?

Mr. Channon: Perhaps my hon. Friend would be kind enough to refer that matter to the Chairman of the Accommodation and Works Committee.

Dining Room Bookings

Mr. Gordon Prentice: To ask the right hon. Member for Berwick-upon-Tweed, as representing the House of Commons Commission, if he will make


financial provision for the publication at monthly intervals of a list of dining room bookings, giving the names of organisations and hon. Members. [15719]

Mr. Beith (on behalf of the House of Commons Commission): The provision of such information is a matter for the Catering Committee, following the implementation of the structure set out in the Ibbs report.

Mr. Prentice: May I urge the right hon. Gentleman to make suitable representations to the Catering Committee? As the Nolan committee is examining the interests of Members of Parliament, their parliamentary consultancies, and so on—about which there has been tremendous public concern—is there not a case for greater transparency and openness, so that people outside know exactly which Members of Parliament are booking how many rooms for outside organisations?

Mr. Beith: The hon. Gentleman can urge the Catering Committee, as no doubt he did before it gave a parliamentary written answer on that very subject on 1 February at columns 671–72. He has also no doubt urged his hon. Friends on the Committee, on which the Opposition are well represented by the hon. Members for Jarrow (Mr. Dixon) and for Heywood and Middleton (Mr. Callaghan).

Energy Efficiency

Mr. Steen: To ask the right hon. Member for Berwick-upon-Tweed, as representing the House of Commons Commission, what has been the cost of energy efficiency measures in the parliamentary estate in the last three years. [15720]

Mr. Beith: The amounts spent specifically on such measures were £32,000, £168,000 and £130,000 in 1992–93, 1993–94 and the current financial year.

Mr. Steen: I just wonder whether enough is being done to reduce the burning of fossil fuels and whether the House is doing enough by setting an example of how we behave in that respect. Bearing in mind the fact that we have a tremendous predominance of staff—many people think that we are overstaffed—in the Palace and its surrounding accommodation, does the right hon. Gentleman agree that it should be possible to get some of those employees to go round turning the radiators down, so that rooms like mine do not reach a temperature of 82 deg F, as it did last week, which is more suitable for a sauna than for an office?

Mr. Beith: I very much agree with what the hon. Gentleman has to say. The House has already achieved a saving of 7 per cent. in gas and electricity consumption and is on course for a target of 15 per cent. by 1996. It hopes to achieve a major reduction in fossil fuel burning by installing a combined heat and power plant in the Norman Shaw buildings and has various technical devices by which it seeks to avoid excess heat being produced. However, I am sure that the hon. Gentleman is right that Members and staff can draw attention to practical means of cutting energy waste.

Mrs. Dunwoody: Will the right hon. Gentleman bear it in mind that brilliant toys which somehow or other do not work are very dangerous, and that at present the House has a great tendency to have a series of lights which click on very effectively after one has passed out

of the corridor that they are meant to illuminate? That is not only exceedingly dangerous, but will cost a fortune in compensation when someone is hurt as a result.

Mr. Beith: I understand that automatic sensors can lead to considerable energy savings and that they are used in the House in places where it is thought safe to do so—not, for example, where there are steps or stairs. However, if the hon. Lady or other hon. Members know of places where their use could lead to danger, they should refer them to the appropriate authorities.

Services

Mr. Harry Greenway: To ask the Chairman of the Finance and Services Committee how much it is planned to spend on House of Commons services in the coming year; upon which main projects; and if he will make a statement. [15721]

Mr. Channon: The estimates for the House of Commons administration and works services for 1995–96 were laid before the House on 23 March 1995, making provision of £73.3 million and £49.9 million respectively for the two votes. Major projects are identified in the annual reports of the Commission.

Mr. Greenway: May I ask my right hon. Friend to find room in that £82 million of expenditure to apply for planning permission for the Terrace marquee, so that it may be open all the year round instead of only eight months a year? [Interruption.] Is my right hon. Friend aware, and is the House aware [Interruption.]—perhaps the hon. Member for Thurrock (Mr. Mackinlay) is not—that that facility is popular, and that it can be used all the year round because there is heating in it? Might it he used to accommodate the children and other people who want to eat their sandwiches at some times of the day?

Mr. Channon: My hon. Friend's interesting suggestion has met with a mixed reception from the House. He may like to refer the matter to the Chairman of the Catering Committee who, I am sure, will be only too anxious to consider it carefully.

Mr. Benn: Is the right hon. Gentleman aware that this year is the 700th anniversary of the summoning of the first Parliament by Edward I, on 27 November 1295? If there is money available for projects, should it not he devoted to improving the facilities for those who visit the House? We still call them "strangers" rather than "electors", so we have not even caught up with 1832, and we still allow them to freeze in the streets when they come to visit Members of Parliament.
There are facilities in Westminster Hall. The security arguments are much less compelling than they were, with the end of the cold war and with the ceasefire in Northern Ireland. We really should treat the people who come to see Members with a lot more care and respect, over and above the changes that the right hon. Gentleman announced today for some eating facilities in the Westminster Hall annexe.

Mr. Channon: The right hon. Gentleman raises an important point, and several other hon. Members earlier raised points akin to his. The Director of Works is preparing proposals. I should be misleading the House if


I suggested that that will happen quickly, but I take note of the fact that an influential and large number of Members wish to press ahead with it at the earliest date.

Disabled People (Access)

Mr. Thurnham: To ask the right hon. Member for Berwick-upon-Tweed, as representing the House of Commons Commission, what further representations the Commission has received about financial provision for access for the disabled to the Palace of Westminster. [15722]

Mr. Corbyn: To ask the right hon. Member for Berwick-upon-Tweed, as representing the House of Commons Commission, what steps he is taking to improve financial provision for disabled access to the Palace of Westminster. [15724]

Mr. Beith: Following the comprehensive review of disabled access carried out by the Accommodation and Works Committee, projects have been included in the works programme shared between both Houses. Provision of about £240,000 was made in the previous financial year and £372,000 has been approved for the current year. A list of the completed and planned items of work has been placed in the Library.

Mr. Thurnham: Does the right hon. Gentleman agree that this building is an obstacle course for the disabled, and that it is high time that it was improved?

Mr. Beith: The hon. Gentleman is right. When the building was designed, thought was not given to the way in which disabled people might obtain access to it, and much work is going into discovering ways in which that can now be achieved. The expenditures that I have described are part of that process, but there will be much more as the Accommodation and Works Committee considers the matter further.

Mr. Corbyn: Can the right hon. Gentleman assure the House that, when that money has finally been spent, the whole building will he fully accessible to all the people who come here who suffer from any type of disability?
Last week, when there was a large lobby for the Disability Discrimination Bill, the staff in the building were helpful to those who came. Nevertheless, it is humiliating that someone who comes in a special vehicle has to get special permission to park it and someone to take them from their car up to the Lobby, and then they have to go up in a goods lift to get into the Gallery, where there is limited space for them.
Frankly, the manner in which we treat people who come to this House belongs in the 18th century or earlier. I have been a Member for 12 years, during which the question has been raised time and time again. Yet there are still no proper facilities for people who suffer from disabilities. They are grossly discriminated against by this House.

Mr. Beith: The sums that I have already described will be only part of the process. I have already indicated that more proposals will be needed to achieve the objective described by the hon. Gentleman—if, indeed, we can ever achieve perfection in a building which was not purpose-built with the concerns of the disabled in mind, as I believe our new building over the way will be. The staff of the House have made every effort, not so much

to provide special permission as to give special and appropriate assistance. A variety of measures is being considered to ensure that disabled people may have access to all parts of the building.

Oral Answers to Questions — LORD PRESIDENT OF THE COUNCIL

Lockerbie

Mr. Dalyell: To ask the Lord President of the Council if he will set up a Select Committee on the destruction of Pan Am 103 over Lockerbie. [15728]

The Lord President of the Council and Leader of the House of Commons (Mr. Tony Newton): I have no plans to propose the setting up of such a Committee.

Mr. Dalyell: Is not the appalling truth that the highest echelons of the United States Government and the Crown Office simply do not want to confront the truth about Lockerbie? Had they done so, would they not have been far more assiduous in carrying out their duty under Scottish law to investigate any leads which might result in the exculpation of the two Libyan suspects or, indeed, any other suspects? They simply have not carried out their legal duty under Scottish law in following the leads. I will not say that they have been bone idle, but they have not carried out their duty. In those circumstances, will the Lord President tell us what wretched excuse is now being given for not going ahead with the second best, which is a Select Committee of this House?

Mr. Newton: On the first point, I can only say that my noble and learned Friend the Lord Advocate remains satisfied that the evidence supports the charges against the two accused and against no other individuals. On the second point, I shall simply say that there have already been numerous inquiries into the Lockerbie disaster and it seems to me that the appropriate course is to seek to pursue the case which is to be mounted against the two people who have been accused, rather than to engage in further inquiries.

Parliamentary Broadcasting

Mr. Mackinlay: To ask the Lord President of the Council if he will make a statement on the current level of parliamentary broadcasting. [15729]

Mr. Newton: Parliament makes available coverage of all the proceedings from the Chambers of both Houses and some Committees. The use made of that material is a matter for editorial and scheduling decisions by the broadcasters. Most viewers see coverage of Parliament in daily, national or regional news programmes. There is also some live coverage and a number of daily or weekly programmes using parliamentary material.

Mr. Mackinlay: Has the right hon. Gentleman noted that there has been a fall in the amount of coverage given by television to proceedings in this Chamber? Is it not partly because of the restrictions placed on broadcasters, which prevent panning shots and reaction shots—for instance, to the comments that I am making now—and the need for greater access and editorial freedom to enable broadcasters to show the totality of the proceedings in this Chamber, rather than just the person who is speaking? Will he also bear it in mind that the Committee Rooms in which a number of important Committees sit do not have


cameras? Those Committees should be reported on television, but it is not possible because the technology is not there.

Mr. Newton: The hon. Gentleman will know that some relaxations in the rules covering the use of reaction shots were introduced in 1991. The Select Committee on Broadcasting, which I chair, took a further look at the rules recently and felt that the necessary consensus did not exist, either in the Committee or in the House, to justify further changes at this stage. Given the amount of coverage that is devoted to occasions when the rules are at their most restrictive, I rather doubt the hon. Gentleman's assumption that such rules inhibit coverage.

Mr. Michael Brown: What powers has the Broadcasting Committee to take action against broadcasting organisations when they flagrantly break the rules that this House has set? For instance, in an incident not long ago Channel 4 News used slow-motion shots of this House when a Division was taking place. What action can be taken when the rules are broken?

Mr. Newton: The Broadcasting Committee could propose a range of actions to the House. In that case, the matter was taken up with the television companies concerned; they have said that they accept that what happened was outside the rules and I would not expect it to recur.

Business Questions

Mr. Flynn: To ask the Lord President of the Council what new proposals he has to improve business questions and answers. [15730]

Mr. Newton: It is not, alas, in my power to improve the questions. I continue to work on the answers.

Mr. Flynn: As a third of the time devoted to business questions is wasted on the meaningless ritual of asking for debates and then having them refused, and as a large amount of the time for points of order is equally wasted, when Members try unsuccessfully to persuade Madam Speaker that their patently bogus points of order are genuine, should we not follow the example of the Indian Parliament, which has introduced a period known as "zero hour" when Members can raise issues of concern without necessarily seeking replies to them, although they sometimes get them? That would avoid wasting time but would still fulfil the function of allowing about a quarter of an hour each day when Members can raise important and urgent matters.

Mr. Newton: First, I would raise an eyebrow at the hon. Gentleman's nerve in asking that question, as I have with me a list of subjects that he has raised at business questions in the past few weeks. Secondly, as it happens, I have arranged a zero three hours for next Wednesday morning.

London Airports (Transport Links)

The Secretary of State for Transport (Dr. Brian Mawhinney): With permission, Madam Speaker, I would like to make a statement about surface links to airports around London. I wish to propose measures designed to promote the imaginative use of rail and other transport infrastructure in a way which will more readily meet the diverse needs of both private and business travellers.
The M11, A1(M), M1, M40, M4, M3 and M23 are the arteries which link some of the country's major regions to the nation's capital. In turn, they are connected by part of the M25. They also serve London's three major airports: Heathrow, Gatwick and Stansted. In addition, these airports have rail links to the centre of London. Trains run from Stansted to Liverpool Street, and from Gatwick to Victoria. A surface rail link from Heathrow to Paddington is under construction, and the airport is already connected to central London by the Piccadilly line.
Demand on this infrastructure is already heavy, and set to increase. The Government have been considering how best to meet this demand for travel through into the next century. Our position on airport development has been set out already in our response to the runway capacity in the south-east—RUCATSE—report. This envisages further exploratory work being done at Heathrow and Gatwick. The Government also indicated that they would initiate further studies of surface access to the airports. I now wish to tell the House what we have in mind.
It is already clear that there is existing rail infrastructure which, if developed, could provide better access to and between the airports. However, no detailed work has been undertaken; nor has there been any rigorous examination of the opportunities this might provide.
In addition, BAA has announced that it has commissioned a £500,000 study to investigate ways of linking Heathrow airport into existing rail and other public transport networks. In parallel, and subject to legislation and a successful outcome to the tendering process, work will commence on a high-speed rail link to connect the channel tunnel to St. Pancras.
The M25, between junctions 12 and 16, has been extended from a three-lane to a four-lane motorway. Despite this, congestion persists at various times of the day. This circumstance led the Government to decide that the capacity of the road should be expanded further. My predecessor announced, in July 1993, that the Government would take to public inquiry a proposal for link roads between junctions 12 and 15, and would launch a consultation on junctions 15 to 16.
The principle which underlay that judgment has not changed. On this, one of the busiest stretches of motorway in Europe, it is essential that people, goods and services should to be able to move efficiently. This national artery makes a major contribution to the competitiveness of our country, whether it is through the transportation of goods or ease of access to our national airports. I reaffirm that we attach maximum importance to safeguarding this economic interest.
However, a number of factors have changed since my predecessor's announcement. Railway privatisation is now making good progress. Responses to the franchising

director have shown that a significant number of private operators see a genuine commercial opportunity to attract new customers on to the railway.
The success of the private finance initiative, similarly, has released energy and innovation in developing imaginative public-private sector partnerships, with a sharper focus on the customer. I believe that this energy can be harnessed in opening up the possibility of greater and easier interchange between air, road and rail services in the south-east, to the benefit of the travelling public.
There have been other changes. We have a developing understanding of the relationship between road building and road use. Issues arising require further study. Furthermore, the Government have been reflecting on the appropriate balance that should be struck between road building and environmental factors.
I have considered how best to bring together in the medium term the economic imperative with these changed circumstances. In particular, I have examined whether there is an acceptable development, short of building link roads, which would be sufficient to meet all our objectives.
Any such development would need to accommodate projected traffic growth into the medium term and create the opportunities for extending complementary rail and coach services. At certain times of the day, 20 per cent. of the traffic on one stretch of the M25 is airport related. In exploring new interrelationships between surface and air travel, it makes sense to move forward on a measured basis, bearing that in mind.
Taking all these factors into account, I have decided that we should not proceed with the M25 link roads, and I shall be withdrawing the draft orders. Instead, we propose to widen the existing carriageway of the M25 to five lanes in each direction between junctions 12 to 14 and 15 to 16, with six lanes in each direction over what will be the most heavily used stretch, between junctions 14 and 15. That widening would occur mainly within the existing highway boundaries, thus minimising the need for extra land purchase.
That proposal, together with new traffic management arrangements, would accommodate projected traffic growth, on the basis of existing assumptions, for at least the next 15 years. We shall publish environmental statements on the proposal, together with an assessment summarising the technical and economic analysis.
In addition, I shall set up an interdepartmental group of officials chaired by the Minister for Transport in London, drawing on expert advice as necessary and including BAA and key rail operators. It will examine in depth the opportunities for rail services to link the existing rail network with the airports and the airports with one another. It will examine the possibility of privately financed intermediate road and rail interchange on the arterial motorways, which might include airport check-in facilities, and will consider whether the interaction between road, rail and airport infrastructure might provide scope for expanding services.
The study will have the following terms of reference: to examine the opportunities for improvements, in particular privately financed improvements, in access to and between London's main airports by rail and through road traffic management measures, assessing in particular the extent to which they could relieve future pressures on the M25 and associated radial motorways beyond the capacity of the new dual-five/dual-six-lane proposals.
The public inquiry on terminal 5 is due to start on 16 May. The decision to proceed with widening the M25, rather than with link roads, will enable the inquiry to start work with complete clarity about my Department's intentions.
Hon. Members will wish to know what effect the decision will have on access from the M25 to the proposed fifth terminal at Heathrow. My Department has published orders for a spur from the link roads giving direct access to terminal 5. The arrangement will need some modification in the light of the decision that I have announced: subject to more detailed design work, I expect access to the proposed fifth terminal still to be by a spur from the widened M25.
I hope that the House will accept that my statement represents a new, exciting and important step towards providing rail, coach, road and air services in ways that are designed to enhance opportunities and that are more closely tailored to the needs of individuals, business and industry.
The artificial separation of roads, airports and public transport in this context could inhibit the imaginative and far-reaching options that may be available to assist travellers and promote our economy. That is especially so when the private sector stands ready to join us in partnership.
The decisions that I have described present us with an unparalleled opportunity to reshape transport provision in this part of the country for the 21st century. We intend to grasp it. I believe that such action will be widely welcomed.

Mr. Michael Meacher: I say immediately that we welcome the decision by the Secretary of State to abandon the Government's madcap scheme to build a 14-lane M25. This is a monumental U-turn, from a scheme that should never have been envisaged in the first place. But will the Secretary of State recognise that even the partial 10 and 12-lane motorway which he still envisages will be very expensive, and will rapidly fill up with traffic?
As the Government's plans to build link roads around three quarters of the M25 have now been entirely scrapped, why has the Secretary of State said nothing about the knock-on effects on the south-east? Why has he not also announced, on the same criteria, the scrapping of plans to widen the M4 to 12 lanes, and the M3 and M23 to eight lanes? Will he accept that the same logic requires him to reconsider the future of the Birmingham northern relief road, the Birmingham western orbital motorway, and the M62 road widening?
Will the Secretary of State recognise that his statement today leaves the Government's transport policy in tatters, because, while roads are being cut, he still says little or nothing about proposals for alternative public transport systems? Why has he made no commitment to crossrail? Why does his statement contain no mention of any progress on Thameslink 2000? Is he not aware that the Government's dogma about bus deregulation prevents the counties from promoting the buses which could play a major role in reducing congestion on the M25 and elsewhere?
Why does the right hon. Gentleman make no mention of the closure of slip roads at peak traffic times, which is well known to be a major source of increased congestion? Will he also confirm that the Government's own planning procedures in the late 1980s mean that a massive number of traffic-generating developments are still likely to be built around the M25? Is he aware that estate agents estimate that more than 37 million sq ft of offices have been given planning permission in the M25 area? What strengthening of planning policy guidance 13 does he propose to prevent an explosion of traffic generation as a result?
If the right hon. Gentleman really believes in public transport, why has he made no mention of improving orbital rail links to Heathrow and around south-west London in support—[HoN. MEMBERS: "He did."] The right hon. Gentleman is strong on feasibility studies and is always for the future, but there are no concrete proposals in his statement. Why is there nothing about the "swoption" scheme which has been developed by the boroughs precisely for this purpose? Why has he made no commitment to improving orbital public transport, in particular by electrifying the north downs line and by giving buses or coaches priority on the M25?
The right hon. Gentleman stressed linking the rail network to airports, particularly Heathrow, but he made no mention of funding, even though the BAA's airport departure tax for a single year—£315 million—would pay for the rail link to terminal 5 and the west. Why has he given no support to the piggy-back rail freight services, which would allow lorry trailers to travel on road wagons and which would reduce congestion in the south-east and elsewhere? Is he aware that the initial route from Scotland and the north-west midlands to the channel tunnel is already feasible for less than £100 million, and that that is less than the cost of the junctions 12 to 15 road widening?
Is the Secretary of State aware that further big road investment west of London contradicts the south-east planning strategy endorsed by the Department of the Environment, which promotes development east of London? Does he accept that both today's statement and his earlier response to the RUCATSE report lack any proper balance, not only between east and west London but between regional airport development and an over-congested south-east, which simply cannot accommodate market-driven expansion of demand for road and air travel indefinitely?
Today's statement is a thin apology for the market excesses of the 1980s. The Tories had warm words for public transport, but no mechanism for delivering them and no guarantee of adequate Government support, without which private finance will not be forthcoming. Labour will plan public transport and produce a national transport programme based on clear objectives and targets to replace the national roads programme, which has for too long been dictated by the Conservatives' friends in the roads lobby.

Dr. Mawhinney: The hon. Gentleman did not mention cycling. I was waiting for that.
I start by thanking the hon. Gentleman for his broad welcome for my statement. That is a good start. After that, he lost the House, hut that was probably understandable. Let me try to pick out some of the bones of the points that the hon. Gentleman made and respond to them.
First, as I made clear in the statement, the proposal to move to D5, with D6 between junctions 14 and 15, will accommodate the projected growth in traffic on the M25 for at least the next 15 years, certainly when coupled with traffic management arrangements. I understand the hon. Gentleman to be telling me that he is against link roads and against the extension of part of the M25 from four lanes to five. I know that he is against the status quo, because he has said that in the past. So he is against seven, against six, against five and against four. The hon. Gentleman did not tell the House what he was in favour of.
The decisions that I have announced today are in the context of the characteristics of the piece of road to which I referred. The hon. Gentleman legitimately mentions the M4 and the M62. As he knows, there has already been public consultation about the M4. We will reflect on the views expressed, and make an announcement shortly. As I suspect the hon. Gentleman knows, further studies have been commissioned of the M62, which will take some time. We will carry them forward, precisely as we said we would. We will examine both those bits of road in the context of their characteristics, just as we have done for this bit of the M25.
All the hon. Gentleman's other comments about motorways were irrelevant to my statement. The House will have noticed again that the hon. Gentleman has been consistent. During questions, he was all in favour of the taxpayer footing the bill and against the private sector making a contribution. That remains his position. However, the opportunities are constantly expanding for the private sector to make a significant contribution to transport infrastructure. We are in favour of that. It provides extra services more quickly for the consumer. The consumer will have noticed that the hon. Gentleman is against it.
Nor did the hon. Gentleman say a single word about the importance of protecting the competitiveness of United Kingdom plc, in competition with other nations' economies. That is important to the Government, even if it is not important to the hon. Gentleman.
I should have thought that the hon. Gentleman would welcome the statement's stress on traffic management. We may well need to see the speed limit on that part of the road reduced at certain times of the day. I should have thought that the hon. Gentleman would welcome that.
We shall certainly use variable message signing on the motorway to give drivers more and earlier information. I expected the hon. Gentleman to welcome that, but all he wanted to do was shut slip roads, which would clog local roads even more. My hon. Friends who represent the relevant part of the country will have noted that aspect of Labour policy.
Finally, let me deal with the great unspoken part of the hon. Gentleman's question. For the first time in connection with the M25, we are contemplating the development and extension of railway links between the airports and the existing rail network. We are examining the possibility of using existing rail infrastructure to provide new services that will not only link the network with the airports and the airports with each other, but link the airports and the rail network with the arterial motorways.
In past flights of fancy, the hon. Gentleman has said that that would be a good idea; we are focusing on action—on the back of the private sector's expressed

interest in becoming more involved both in the railway system and in the provision of transport infrastructure. The hon. Gentleman need only look at the Heathrow-Paddington link, which is financed entirely by the private sector, to give weight to my words.
The House will have observed that the Opposition have a policy of moratoriums on road building and a commitment to public ownership, and are prepared to allow both to get in the way of developing the railway, road, coach and airport services that will be fitting for the country in the 21st century.

Mr. Kenneth Baker: My right hon. Friend's statement will be widely welcomed by all communities and groups concerned with the M25, from all parties, that have opposed the 14-lane motorway. It would have caused too much environmental damage and pollution. I also welcome my right hon. Friend's proposal for studies relating to development of the rail network and communications in the south-east.
May I press my right hon. Friend on the important question of the time scale? In particular, will he help to revive the idea of Thameslink—which is currently in limbo—and that of crossrail? Both projects could be financed privately, and the south-east needs such developments to reduce future congestion.

Dr. Mawhinney: I am grateful to my right hon. Friend for his encouraging words. I believe that he speaks for the vast majority of people in that part of the country—and, indeed, further afield—in welcoming my statement.
Our progress with the study will be as speedy as possible, but in a sense it breaks new ground: for the first time we are considering the possibility of expanding railway services—with private sector funds, but with the co-operation of the public sector—in a way that privatisation and the private finance initiative have uniquely made possible. I suspect that the study will take between a year and a half and two years to complete.
I assure my right hon. Friend that neither Thameslink nor crossrail is in limbo. I have attended meetings on both in the past few days, and progress is being made.

Mr. Paul Tyler: Does the Secretary of State accept that we at least welcome the evidence of his Pauline conversion on the road to Heathrow? Will he also take comfort from the fact that hon. Members in other parties will have listened carefully to what he said about improving rail access not only to Heathrow but to other airports?
Will the right hon. Gentleman confirm that the time scale to which he referred in reply to the right hon. Member for Mole Valley (Mr. Baker) does not preclude the possibility of speedy improvement of rail access from the west, perhaps including a park-and-ride arrangement east of Slough on the M4? It may not he necessary to increase the capacity of the M25 to the extent that the statement anticipates.
Will the right hon. Gentleman also confirm that the work undertaken by the Standing Advisory Committee on Trunk Road Assessment has been applied to each section of the M25 that he has mentioned, and indeed to the other motorway proposals to which he has referred?
Will the right hon. Gentleman also confirm that the connection between increasing capacity and traffic generation—the opportunity for people to use that stretch


of motorway—has been applied to the decisions that he has announced? Does he accept that many hon. Members hope that this is the beginning of the end of motorway madness, and that in future there will be no more speedy driving through the fog of policy indecision?

Dr. Mawhinney: I am sorry that the hon. Gentleman added the last bit, which is nonsense. I shall ignore it and get to the meat of his question.
I am grateful to the hon. Gentleman for his welcome for the statement, although I assure him that it is in no way a Pauline conversion on the road, or indeed the rail, to anywhere. I have announced that we shall not proceed with the link roads, and I shall withdraw the orders. We shall go forward on the basis of expanding part of the M25 from four lanes to five lanes, with six between two junctions to facilitate the spur road to the proposed terminal 5.

Mr. Andrew Mackinlay: It is not agreed yet.

Dr. Mawhinney: The "proposed" terminal 5, I said.

Mr. Mackinlay: The Minister is prejudging it.

Dr. Mawhinney: I assure the hon. Member for North Cornwall (Mr. Tyler) that we have taken into account a whole variety of circumstances, all of them appropriate, in coming to the judgment which I have announced.
While the hon. Gentleman may be right that some aspects of the potential development of rail services may become clear ahead of others, it will be for the committee to offer me advice through my hon. Friend the Minister on whether it is possible or sensible to proceed piecemeal, or whether it would be more sensible to wait until the study is complete before making judgments.

Sir Geoffrey Pattie: My right hon. Friend's decision to scrap the link roads will be widely welcomed in my constituency and in the neighbouring constituency of my hon. Friend the Member for Surrey, North-West (Sir M. Grylls), who is ill with bronchitis. Will my right hon. Friend confirm that he will continue to study carefully the question of noise reduction measures? Many of the proposals that he has announced will generate more noise, and that issue must he kept constantly in mind.

Dr. Mawhinney: I am grateful to my right hon. Friend for his welcome and his kind words, and for the message that he conveyed about his parliamentary neighbour, whom I am sure the House will wish well in his recovery. I understand precisely the importance of his point about noise. In terms of noise abatement, we plan to ensure that, when the fifth lane has been added to part of the motorway, the overall noise level will not exceed the present level from the four lanes.

Mr. Dennis Skinner: When it is stripped of all verbiage, does not the statement mean that the Minister has committed the House only to a five-lane motorway on part of the M25? All the rest is just marshmallow words.

Dr. Mawhinney: Given the importance which the hon. Gentleman normally attaches to public transport, that is a typically curmudgeonly response to my announcement.

Even if he cannot bring himself now to welcome the prospect of new, better and more consumer and passenger-sensitive transport for the 21st century, I hope that he will do that in future, when it all becomes a reality.

Mr. Tim Smith: My right hon. Friend's statement will be welcomed by my constituents and by those of my hon. Friend the Member for Uxbridge (Mr. Shersby), who did not like the proposals for link roads and will be glad to hear that it is now possible to meet the same traffic demand with a more modest scheme. Is it not clear that, contrary to what is sometimes suggested, the Government have an integrated transport policy and are as much committed to rail as to road?

Dr. Mawhinney: I am grateful to my hon. Friend for his warm welcome. The Government have always looked at the possibility of practical arrangements to assist the passenger. The new circumstances for the development of rail services open up opportunities that we must take if we are to discharge our responsibility to the taxpayer, the passenger, business and industry. We shall seek to do that, so that we may offer choice. Choice is a value to which we attach importance, but it does not commend itself to the Opposition.

Mr. Stephen Timms: Will the study take account of the point made by my hon. Friend the Member for Oldham, West (Mr. Meacher), which represents a consensus on the need to promote development east of London to ease development pressures west of London? Will the study have that concern especially in mind? Following the right hon. Gentleman's welcome remarks about developing the rail links between Stansted, Heathrow and Gatwick, can he confirm that crossrail will be an essential part of a satisfactory rail network between the three airports?

Dr. Mawhinney: I am grateful to the hon. Gentleman for his welcome, which I appreciate. I understand and accept the importance of regeneration on the east side. He will accept that this is not the time for me to prejudge what the group will produce, either in suggestions relating to crossrail or on specific parts of the country. However, as was confirmed both at Question Time and in my statement, both the points he has raised are on our agenda.

Mr. David Wilshire: As much of the affected part of the M25 is in my constituency, I welcome the end to the uncertainty. My initial reaction to my right hon. Friend's announcement is that it is a sensible compromise between two equally valid extremes. His new rail initiative opens up exciting possibilities, which I whole-heartedly endorse.
Will my right hon. Friend also accept my welcome for his provisions for a possible terminal 5, which I believe is vital for the future economic prosperity of my constituents? Will he arrange for Highways Agency officials to meet me and affected constituents at an early opportunity? Can he send full details to all those living near the affected route? Will a public inquiry he obligatory?

Dr. Mawhinney: I shall try to recall all my hon. Friend's questions. First, we will notify all those who objected to the link roads proposal about the new arrangements. Secondly, I can confirm that, when the economic assessment for the new proposals is published, the Highways Agency will be available to explain that at


public displays. Thirdly, because my proposals lie essentially within the curtilage of the existing road arrangements, there is no statutory obligation to hold a public inquiry.
Finally, I appreciate my hon. Friend's general welcome. I am grateful for it, because he has been assiduous in representing the interests of his constituents. However, I must tell him that the Secretary of State for the Environment and I are the two people in this country who are not allowed to comment on the question of terminal 5.

Ms Glenda Jackson: While welcoming the right hon. Gentleman's concern to expand and integrate the rail system in the south-east, may I ask him to give the House some idea of how that will be achieved, as the Government have already spent £1.25 billion of taxpayers' money on privatisation? For many commuters in the south-east, all that that has produced is a deterioration in services, the closure of stations and a rise in rail fares.

Dr. Mawhinney: The hon. Lady has misread her script—the figure is £240 million, not £1.25 billion. She is only £1 billion out, but I suppose that, for the Opposition, it is not an unreasonable estimate.

Ms Jackson: It is the Department's figure.

Dr. Mawhinney: The hon. Lady is not reflecting the Department's figures. I shall tell her what I told the Select Committee on Transport—that the figure is £240 million. She simply misleads herself.
On the main issue, I can tell the hon. Lady that we intend to explore the use of the existing rail infrastructure. That is the important point. We are not talking about laying a whole series of new railway lines; they already exist. We need to consider how best to make use of those lines, alongside and complementary to other forms of transport, in the best interests of passengers. We want to give them a degree of choice that currently does not exist. We attach value to that, and I can tell the House that we will carry forward that study as quickly as possible.

Mr. Peter Ainsworth: Will my right hon. Friend accept my thanks for having listened so carefully to local people's concerns about link roads? Does he agree that his announcement today marks a significant shift in Government thinking, from a demand-led transport planning policy towards a more responsive, perhaps more reflective, approach? Will he reiterate his remarks to our right hon. Friend the Member for Chertsey and Walton (Sir G. Pattie) about the importance of restraining noise from motor cars using the M25? As my right hon. Friend the Secretary of State knows, noise is a prime and outstanding concern among my constituents in east Surrey.

Dr. Mawhinney: I am grateful to my hon. Friend for his welcome. He and I share the understanding that it is important to have an M25 that enables the competitiveness of United Kingdom plc to be maintained. That can be achieved in terms of the announcements that I have made today. In addition, the possibility of providing further complementary services through rail infrastructure development, with a strong eye to the private sector, can produce an added bonus, which the country will generally welcome as it moves into the 21st century.
My hon. Friend is right: every transport initiative affects the lives of a variety of people, some of whom live close to that initiative. We have sought always to be sensitive, especially in relation to the issue of noise. I am happy to repeat what I said to my right hon. Friend the Member for Chertsey and Walton (Sir G. Pattie): we aim to put noise abatement arrangements in place around the fifth lane, which will ensure that the overall noise level does not exceed the present level.

Mr. Jeremy Corbyn: As the Secretary of State has now admitted that he will widen the M25 to a combination of 10 and 12 lanes, plus a hard shoulder, and, as the proposals are within the curtilage of existing road arrangements, will avoid a public inquiry into the enormous expansion of the M25, will he take this opportunity to explain to the public how his Department will answer the charge that building and widening motorways, and increasing road capacity, simply attracts and encourages more traffic, which will lead to further pressures for more road widening and yet more road building? Why does he not come off it once and for all, stop road building and seriously put money—yes, public money—into rail infrastructure to improve public transport, rather than encourage one person to drive around the M25 in a car on his own, making it Europe's largest car park?

Dr. Mawhinney: That is not only nonsense, but reflects a deep prejudice on the hon. Gentleman's part, which is unrelated to the reality of what we are talking about. Clearly, his question reflected the fact that he has neither listened to my statement nor read the SACTRA report. I suggest that he goes away and does both.
In his question, or in any other circumstance, the hon. Gentleman has produced no evidence to suggest that, if the road's capacity were not increased, and if rail infrastructure, as he envisages it, were put in place, the UK's competitiveness would not be damaged. Whether he likes it or not, others make individual choices, and some of those choices involve the transportation of goods and services by road. That must be—and is—part of the rationale for the development of that part of the road from four lanes to five. It simply reflects again the fact that we on Conservative Benches have a concern about the UK's competitiveness, which is not shared by the Labour party.

Mr. John Wilkinson: May I express my warm appreciation for my right hon. Friend's statement today, which clarifies the strategy that has underlain his wise decisions in response to the RUCATSE report? In particular, may I say how welcome it is that Her Majesty's Government understand how important rail links are for the development and economic well-being of airports, especially Heathrow?
For my constituents, many of whom work at the airport, it is good that the Government understand how essential it is not only that Heathrow should grow and prosper, but that it should have a prospect of effective, well-co-ordinated rail links both to the west to Slough and to the south-east to Waterloo and ultimately, perhaps, through crossrail.

Dr. Mawhinney: I am grateful to my hon. Friend for his welcome and encouragement. No doubt he will have noticed that the BAA is embarking on a complementary examination of rail links between Heathrow and the rail network. I think that, as we proceed with the examinations


in what I hope will be a complementary fashion, we shall both recognise that there is extra potential benefit to travellers, and we wish to explore that.

Mr. Jim Dowd: The Secretary of State quite rightly mentioned the three major airports in London, but not London City airport. He will be aware that one of the key links from south-east London to the City and many other places is the Brunel tunnel on the east London line, which is now closed for at least seven months because of work on the Jubilee line.
Has he had time to assess the impact of the curious decision by his colleague at the Department of National Heritage to list not only the portals of the tunnel, which were already listed, but the hole in the ground itself? Is he aware that people in south-east London are keener on having reliable transport links and having them in use as soon as possible than on becoming sightseers in an industrial museum?

Dr. Mawhinney: First, like the hon. Gentleman, I recognise the importance of the line. Secondly, as he knows, the listing is a matter for my right hon. Friend the Secretary of State for National Heritage, but we are looking at ways to move the process forward as quickly as possible.

Mrs. Cheryl Gillan: I welcome my right hon. Friend's statement, which shows common sense in taking the brave route to update our plans for an integrated transport system in the south-east, but may I refer him back to his answer to our right hon. Friend the Member for Mole Valley (Mr. Baker), in which he led us to believe that the time scale would be approximately two years? Will he clarify that in relation to crossrail? Crossrail is very much wanted by my constituents in Chesham and Amersham, but yet again the project looks as if it is being put on the back burner, which will cause them great concern. Will he give me an assurance?

Dr. Mawhinney: I am grateful to my hon. Friend for her comments. Crossrail may or may not turn out to be an integral part of what is envisaged in my statement, but work is proceeding independently with crossrail, and I would expect to receive the result of that work before the end of the year.

Mr. Mackinlay: Does the Secretary of State accept that, taken with his recent announcement on the RUCATSE report, his statement will mean a massive concrete funnel heading towards Heathrow, and that that will not satisfy the constituents of Conservative Members who represent Surrey and Middlesex, because they will realise that it will mean a major widening of the M25, which is environmentally unacceptable to them?
Does the right hon. Gentleman also accept that some of us realise that, in essence, the Government are pre-empting the inquiry into terminal 5? It is indicative of the fact that the Government are craven to the BAA, and British Airways for that matter, and will not recognise that there is a need for a major independent review of aviation and airports policy. Would not such a review, if it were held, point to the advisability of expanding

Stansted and exploiting the great enterprise of Manchester on behalf of United Kingdom Ltd., instead of putting all our eggs in the one basket of Heathrow?

Dr. Mawhinney: The House will have to make its own judgment. On the one hand, I have the hon. Member for Thurrock (Mr. Mackinlay) telling me what the people of Surrey think about the proposal, but on the other I have my hon. Friends who represent the people of Surrey telling me precisely the opposite. I invite the House to make a choice: will it accept the views of my hon. Friends who represent the people of Surrey or those of the hon. Member for Thurrock? I have no doubt that what my hon. Friends who represent those people say is correct, and that what the hon. Gentleman says is wrong. I am sure that the people of Surrey are as pleased as those of Peterborough that the hon. Gentleman does not represent them.

Mr. David Lidington: I offer my warm congratulations to my right hon. Friend on the creative direction in which his statement has taken this country's transport policy, but may I remind him of the importance that my constituents attach to the crossrail project, which would secure their personal convenience as passengers and ensure the economic well-being of Buckinghamshire as a whole? Does he still hope that the promoters of crossrail will be able to bring forward an order under the Transport and Works Act 1992 later this year?

Dr. Mawhinney: I am grateful to my hon. Friend for his kind remarks. I know of his involvement in the crossrail project, and I am happy to reiterate what I told our right hon. Friend the Member for Mole Valley (Mr. Baker) a moment ago. The time scale is as I set it out.

Sir John Cope: Can my right hon. Friend assure me that the study that he described will include improvements to rail links from Heathrow to the west? The Great Western line goes extremely near Heathrow, and it does no one any good if we have to go into Paddington and back out; nor, for that matter, if we have to come to the inside of the M25 by road to get to Heathrow.

Dr. Mawhinney: My right hon. Friend is absolutely right, and the answer is yes.

Mr. David Sumberg: While I warmly congratulate my right hon. Friend on making exactly the right political and environmental decision on the M25, may I tell him that I and my constituents are angry and disappointed that he has failed to come to the House this afternoon with a similar decision on the M62? As a result of his statement, people who live around the M25 have been relieved of planning blight and inadequate housing management by his Department, but my constituents have not been, which adds insult to injury. Will my right hon. Friend quickly and urgently—not in two years' time—make a similar statement to the House on the M62?

Dr. Mawhinney: I am grateful to my hon. Friend for his welcome for the proposal that I announced for the M25. As I said in an answer to another question, the M62 is the subject of some further studies, as my hon. Friend understands. I know that he wants those studies to progress as quickly as possible, and I can assure him that


I want that, too. When they have done so, and we have been able to form a judgment, I will be happy to convey that to his constituents through him.

Mr. Mark Wolfson: Does my right hon. Friend accept that my constituents will be delighted at the statement today, especially because it brings together a number of strands of the Government's transport policy? Does he also agree that the need to develop a fourth lane on the other parts of the M25 is paramount, and that those who oppose it are being unrealistic about keeping that road open as an effective artery for British growth and development?

Dr. Mawhinney: I am grateful to my hon. Friend for his kind words, for which I thank him. I can confirm that the road is a major artery in the United Kingdom, and needs to be treated as such. We have plans to expand the existing M25 to four lanes for about 70 per cent. of its distance which, added to the already planned four lanes, will mean that about 90 per cent. of it will be at least four lanes. We believe that to be important for precisely the reasons that my hon. Friend identified.

Mr. John Marshall: Can my right hon. Friend tell the House how quickly he expects the M25 expansion to take place? He said that the move to five and six lanes would not necessitate a public inquiry. When can we expect to drive along the fifth and sixth lanes?

Dr. Mawhinney: I made it clear to the Highways Agency today that I want it to make all deliberate speed in moving ahead with that expansion. An environmental assessment must be made and published, as well as an economic assessment, but we will make measured progress as quickly as possible, for precisely the reasons that my hon. Friend implied.

Mr. James Couchman: In Kent, we are mindful of the fact that we have a unique position as the gateway to and from the continent. Traditionally, the south-east segment of London and the home counties has been the worst served by transport. Will my right hon. Friend ensure that the committee that studies these important matters considers transport to and from the airports from the south-east—from Kent, my constituency and the others around it?

Dr. Mawhinney: I understand precisely the point that my hon. Friend makes, and would want the report to be as comprehensive as possible in all the circumstances.

Mrs. Jacqui Lait: Does my right hon. Friend expect that his welcome announcement will have an effect on non-motorway road schemes such as the A21 and the A259, where progress is needed to strengthen the local economy?

Dr. Mawhinney: While I understand my hon. Friend's point, my announcement was about one particular part of a road, given its particular circumstances. It should not necessarily be extrapolated to any other road.

Mr. Richard Ottaway: Does my right hon. Friend accept that, with all the winners on Conservative Benches, there is bound to be at least one loser, and that his statement will not be welcomed in my constituency, where we shall continue to grapple with through traffic to Gatwick on our inadequate roads? Is he aware that, from the A3 to the south-west, round to the A2 to the east, there is no decent road in or out of London and we shall continue to suffer congestion and rat-running? Will he at least introduce a feasibility study to address that issue in south London?

Dr. Mawhinney: I am mindful of the point that my hon. Friend makes. I hope that, on reflection, he will not feel quite as depressed as his question implies, not least because I assume that the benefits which I hope and believe will flow from the rail study may assist his constituents also.

WAYS AND MEANS

Ordered,
That provision (including provision having retrospective effect) may be made amending section 43 of the Value Added Tax Act 1994.—[Dr. Liam Fox.]

Ordered,
That provision affecting the charges to income tax, corporation tax and capital gains tax may be made about the interest paid on gilt-edged securities and about cases in which, where gilt-edged or other securities are transferred from one person to another, there is—

(a) a contract or arrangement under which a person makes a payment which is, or is treated as, representative of amounts paid or payable in respect of the securities transferred; or
(b) a contract or arrangement under which the transferee is or may be required to transfer securities, or benefits accruing from the redemption of securities, to the transferor, to his nominee or to a person connected with the transferor.—[Dr. Liam Fox.]

Orders of the Day — Finance Bill

As amended (in the Committee and in the Standing Committee), considered.

New clause 17

POOL BETTING DUTY

'.—(1) In section 7(1) of the Betting and Gaming Duties Act 1981 (which specifies 37.50 per cent. as the rate of pool betting duty) for "37.50 per cent." there shall be substituted "32.50 per cent."

(2) This section shall apply in relation to any pool betting duty the requirement to pay which takes effect on or after 6th May 1995.'.—[Mr. Heathcoat-Amory.]

Brought up, and read the First time.

The Paymaster General (Mr. David Heathcoat-Amory): I beg to move, That the clause be read a Second time.
We debated pool betting duty in Committee. In rejecting a similar new clause tabled by my hon. Friend the Member for Sutton and Cheam (Lady Olga Maitland), I said that we were, nevertheless, in touch with the pools companies and would review the duty in due course. Before I report the outcome of those discussions, I remind the House that, in 1990, pool betting duty was reduced from 42.5 per cent. to 40 per cent., with the difference being donated to the Football Trust. The money was used to update football grounds in line with the Taylor report on the Hillsborough disaster.
In August 1991, the duty was cut again by 2.5 per cent. to the present 37.5 per cent. The proceeds of that duty cut are paid to the Foundation for Sport and the Arts. The pools companies make a further voluntary donation to the FSA of 5p for each pound stake. Hon. Members will know how appreciated that funding for the FSA is and that it supports many excellent projects in all our constituencies.
Recent discussions with the pools companies have confirmed the scale of the competition that they face from the great success of the national lottery. We do not know how the position will develop in the longer term. The pools companies are responding to the challenge with new schemes and are helped by a number of deregulatory measures introduced as a result of the National Lottery etc. Act 1993. In the short term, however, the future of the football pools is threatened and, as a result, the Football Trust and the FSA face declining revenues. The Government have therefore decided on a 5 per cent. cut in pool betting duty. In return, the pools companies have confirmed that they can maintain their contribution to the organisations that I mentioned. That is a good outcome, and I commend the new clause to the House.

Mr. Michael Stern: How much will that measure cost in 1995–96 and in future years?

Mr. Heathcoat-Amory: In a full year, it will cost some £40 million.

Ms Hilary Armstrong: The Opposition welcome this move by the Government, which, in Committee, they were determined not to make. I am sure that the House is aware that the Opposition

managed to secure a tied vote in Committee on a similar proposal, so we are pleased that the Government have now recognised the Committee's spirit and will.
It is important that the Government try to establish a level playing field. It is essential that we ensure fair trade and competition, because the advantages given to Camelot have meant other forms of gambling have enjoyed far from fair opportunities in comparison.
It is somewhat ironic that I should deal with this issue, because as you know, Madam Speaker, I am inherently uneasy about any form of gambling. I spent part of this weekend undertaking my duties as treasurer of the Methodist Division of Education and Youth. We discussed how we should deal with the fact that funds for some of our charitable work are declining and with the Methodist Church's continuing implacable opposition to the lottery and to receiving funds from it. It is therefore a little difficult for me to speak about the new clause. I welcome, however, the fact that it will ensure that all those involved will be treated fairly, because, to date, the pools industry has not had a fair deal.
The Government should keep an eye on things, because we are not sure whether the measure will work and whether other forms of raising money for charitable and good causes will continue to survive and prosper. We already know from the charities of their considerable unease about what is happening to other forms of charitable giving. Last week, the problems associated with a charity involved in cancer research were highlighted. Such specific charitable work is outside the current provisions for charitable giving agreed by Camelot.
The Government should seriously reconsider the terms that they set down for Camelot because it is clear that it is making far more money than I suspect the Government intended or envisaged when they issued the guidelines for the operation of the lottery and accepted its hid. No one knows the precise amount that Camelot has been able to take as profit from the lottery, because the lottery has been running for only a short time and we do not have the company's first-year results. It has been speculated in the press and elsewhere, however, that it has already made a considerable fortune in a relatively short time.
I hope that the Government now acknowledge that certain problems have arisen that they did not envisage when the national lottery was set up, not least those experienced by particular sectors in society. As yet, no suggestion has been made about how those sectors will be dealt with by Camelot through its charitable committee. How will their problems be sorted out? It is clear that people who buy their lottery ticket see that as their form of charitable giving, but the proceeds from those tickets are not meeting the needs of many charities.
We know that the pools industry in particular has suffered from the effects of the lottery. One of the pools companies said that, as a result, it intended to pull out of the Football Trust, which has done so much to improve football grounds. I am delighted, therefore, that the Government have acknowledged the importance of acting now and have not waited until the Budget to do so. I hope that the Government will keep a close eye on that. The British public will be horrified if the lottery company makes such excessive profits while charities are seen to he failing as a result of the activities of the lottery.
Those people who work for, and who obtain their work from, the pools—for example, those in the print industry—have also been severely undermined. Many


jobs have gone already. It was important, therefore, that steps were taken to protect the good works arm of the lottery and to protect the pools industry so that it might continue to flourish. It is an important sector of the economy, especially in the north-west.
For those reasons, we welcome the measure, but we hope that the Government will monitor things carefully and will allow the House to reconsider the position to ensure that all the things that hon. Members on both sides of the House wanted when they agreed to the introduction of the lottery—for example, the protection of other parts of the gambling industry and charities—are properly placed in the framework of fair competition.

4.30 pm

Mrs. Jane Kennedy: May I congratulate the hon. Member for Sutton and Cheam (Lady Olga Maitland) on tabling a new clause in Committee and say to the Paymaster General how very warmly welcomed the Government new clause is on Merseyside?
When the vote was tied in Committee, we were deeply disappointed that the two Liberal Democrat Members who should have been present failed to turn up and vote. Given the representations that they make on Merseyside, we felt that that was a significant and serious omission.
Our preoccupation on Merseyside has broadly been with the number of jobs that we have perceived to be under threat as a result of the introduction of the national lottery. Ninety-five jobs have gone at Vernons Pools and 560 at Littlewoods. Although I accept that those jobs have not been lost entirely as a result of the introduction of the national lottery, its introduction has, in part, had an impact on employment prospects on Merseyside.
The new clause recognises that the national lottery has been an immense success and that it will continue to go from strength to strength. The number of lottery retail outlets is growing by 1,000 a month, Camelot has just introduced a new scratch card game that I have seen advertised under the name of Instants and a second weekly on-line game is to be introduced in the summer. The improved terms for competitiveness of the pools companies will not pose a threat to the national lottery.

Mr. Dafydd Wigley: Does the hon. Lady accept that the introduction of scratch cards has had a serious effect on other charities, such as Tenovus, a cancer charity, and that the problem must be considered? I welcome the steps that have been taken today and their significance for people such as the Foundation for Sport and the Arts and the others who will benefit, but that worry remains.

Mrs. Kennedy: I accept what the hon. Gentleman says. Indeed, if pools companies develop their marketing and new products, that will have an even greater impact on the sales of small lotteries run by charities. That emphasises the need for the Government to keep the matter under review.
We are witnessing the determination and resilience of pools companies, as demonstrated by the development of new products. I wish to mention one or two aspects of the way in which their determination to succeed despite problems presented to them by the national lottery has been demonstrated recently.
Before I do so, I should deal with marketing, which the pools companies are desperately eager to get on with. It is estimated that the national lottery's television advertising campaign has cost between £30 million and £50 million in its first year. No pools company is in a position to compete with such expenditure on television marketing, although the ability to do so is very much welcomed.
I understand that Littlewoods is considering following Zetters in reverting to an older system of scoring. That will result in smaller prizes overall, but more winners. I understand that Zetters' sales have increased as a result. Perhaps the national lottery will get the message and learn a lesson from that method.
As I understand it, the reduction in pools betting duty will have an impact on the Football Trust. Since Littlewoods has given notice that it is to reduce its contribution from spot-the-ball by 6 per cent., following the dramatic decline in sales of the game, what does the Paymaster General estimate the impact will be on the Football Trust?
Vernons pools stated its intention to withdraw its 5p contribution to the Foundation for Sport and the Arts from every coupon sold, but I understand from the Paymaster General's opening that it is to continue that commitment. That is very welcome as many small organisations in my constituency have benefited directly from the Foundation for Sport and the Arts, but it means that the 5 per cent. reduction in pools betting duty is effectively 2.7 per cent, with the consequential overall cost benefits of that lower figure.
I recognise that the Government's intention is good and I welcome the new clause and the improvement that it makes in allowing pool companies to compete, but if the companies continue to support other organisations they will not benefit from the whole 5 per cent. reduction in betting duty. Clearly, the pools companies were saying that they needed a reduction of 5 per cent. to be able to compete more fairly. I ask the Paymaster General to take that point on board in conducting the overall review of the impact of the national lottery on businesses that are so important to the constituents whom I represent.

Lady Olga Maitland: I warmly welcome the new clause. It is good news to the pools industry, which has campaigned for such action for some time. Putting £34 million back into their coffers is rather like sending a lifebelt out to a drowning man at sea. The move has given the pools companies a chance to regroup, replan and—we hope—move into more fortunate times.
The reduction in duty has not come a moment too soon. I am grateful for the fact that the Paymaster General has decided to ensure that it takes effect on or after 6 May 1995—in other words, almost immediately. I appreciate that he now recognises the urgency of the situation.
As my hon. Friend the Paymaster General knows, I went to see him in private, made an urgent plea for action and moved my new clause in Committee. Indeed, I had been charting the fortune and misfortune of the pools industry ever since the launch of the national lottery. I was a member of the Committee that considered the National Lottery etc. Bill and I recall clearly how we were assured that the pools industry would not run into dire straits as a result of the national lottery. The national lottery has been a staggering success, but its success has plunged the pools industry into deep crisis. As the House has heard, there


has been a serious loss of jobs and a crisis of confidence. The most important thing about the new clause is that it offers a chance to move forward.
It has been very encouraging to speak to all the pools promoters, who were delighted at the news, but they uttered a word of caution. They trusted that this move alone would not close the matter and they hoped that the Government would keep an open ear and, indeed, review the situation as time goes on. They hoped that, if they have to raise the matter again, they will be free to do so. Moreover, they said that they would not again use the issue about good causes and the Foundation for Sport and the Arts as a lever—the foundation has suffered so much during the latest downturn—and they recognised that future judgments would have to be made purely and solely for commercial reasons.
None the less, the new clause is excellent news. It shows that the Government are listening and that they will respond to companies in trouble. That in turn will be very much appreciated.

Mr. Stern: I have no desire to he churlish about the proposal. The Foundation for Sport and the Arts does a great deal of useful work and would have been prevented from doing some of it without the new clause. A ballet dancer in my constituency depends on the foundation for the continuation of her training; and a great deal of useful equipment has been provided for a female weightlifting group there.
I must, however, sound a note of caution—it is, perhaps, inevitable that I should do so when the whole House joins together to welcome a tax cut. I should be grateful if the Minister gave us information about the extent, if any, to which the Government's plans for raising taxation from betting have been changed as a result of this announcement. When the Chancellor made his Budget statement, he will have included, in the balance of tax and expenditure, a certain yield from betting.
Those of us who follow the industry's progress in the newspapers, or who, like me, invest regularly in the national lottery—[HON. MEMBERS: "Invest?"] That is the technical term. Nevertheless, it is clear that the taxation yield of the national lottery has been higher than expected. I should like my hon. Friend to reassure me that the expected yield, next year and in subsequent years, is sufficiently higher from the national lottery and other forms of betting to allow him to give away this £40 million.
Without such an assurance the House might want to debate whether such a tax cut would have been more usefully applied in other directions. I do not intend to sound unwelcoming about the tax cut. I have argued in the past and will argue again that all tax cuts are of benefit to the economy, but I hope that my hon. Friend can demonstrate this afternoon that this tax cut will not involve a diminution of yield to the Exchequer and that it is based on something rather more substantial than undue pressure from the pools companies.

Mr. Wigley: I apologise to the Minister for missing some of his opening remarks.
An important point has been made about the Foundation for Sport and the Arts. There can be no question hut that it does excellent work. I doubt whether

there is a constituency in the land that does not receive some benefit from it—more than 15,000 small clubs and organisations have benefited, and more than £200 million has been paid out, often in small sums, occasionally in larger ones.
The hon. Member for Liverpool, Broadgreen (Mrs. Kennedy) made an important point about how the changes will ensure that Vernons can still pay out adequate sums to maintain the work being done by the FSA. I should like also to take up her point about scratch cards. The Minister will be aware of the severe impact that the lottery scratch cards have had on some charities that depend on scratch cards and other forms of this sort of gambling. I do not criticise the lottery, although it has been much more successful than people expected, but it has had a knock-on effect. Tenovus in Cardiff has been doing vital work in cancer research and it would be unfortunate indeed if, as appeared from last week's announcement, that work were to be undermined. I should like some of the proceeds of the national lottery to be channelled in that direction, especially when no one wins the large prizes. Instead of rolling them over, the moneys should be distributed to good causes—but that is another issue.
I hope that in this short debate the vital work of the Foundation for Sport and the Arts can be safeguarded, following the Minister's announcement.

Mr. Heathcoat-Amory: I am grateful for the support of the House for the new clause—especially for the support of my hon. Friend the Member for Sutton and Cheam (Lady Olga Maitland), who tabled the original new clause. To answer the hon. Member for Caernarfon (Mr. Wigley) I should say that we shall of course keep the matter under review. If there has been a reduction in charitable giving, that does not necessarily follow from the success of the national lottery, but to the extent that it does I agree that the one fifth of the money going to good causes that will be channelled to charities will at least make up, in cash terms, the money that may be forgone in the shorter term.
The national lottery is a national success. The hon. Member for Durham, North-West (Ms Armstrong) almost made that success sound like a failure. The fact is that the lottery will give large sums of money to a wide range of good causes, including charitable causes.
4.45 pm
The hon. Member for Durham, North-West sounded critical of Camelot, but that company gained the right to run the lottery in competition with other bidders. It would be quite wrong of us to break its contract just because the lottery has been so successful, but I am sure that she was not asking us to do that. We should all rejoice in the fact that these sums will be available for good causes.
To answer my hon. Friend the Member for Bristol, North-West (Mr. Stern), I should perhaps correct my earlier answer to him. The sum of money forgone in a full year will, I believe, be £30 million, not £40 million. I can confirm that it looks as though the total yield from this area of gaming and betting will remain buoyant overall. I think that he would agree that it is right to look again at pools duty, simply because the pools face direct and evident competition from the success of the national lottery.
I say to the hon. Member for Liverpool, Broadgreen (Mrs. Kennedy) that the cut in duty will not adversely affect the Football Trust. Quite the reverse: maintaining


the viability of the pools companies means that total pools turnover will be kept up, so funding for the Football Trust and for the good work that it does will be enhanced.
The pools companies have told me that they intend to keep paying not just the 2.5 per cent. to the Football Trust and the FSA but the 5p per coupon that they now voluntarily give the FSA. The 5 per cent. duty cut will help these companies to maintain their overall prize money; that in turn will help them to keep up their profitability, turnover and employment—and hence their giving to the FSA and the Football Trust.
This seems to be one of those rare occasions when the whole House should welcome what the Government have done, and I am grateful for remarks along those lines.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New clause 14

GROUPS OF COMPANIES

'.—(1) Section 43 of the Value Added Tax Act 1994 (groups of companies) shall be amended as follows.

(2) After subsection (1) there shall be inserted the following subsection—
(1A) Paragraph (a) of subsection (1) above shall not apply in relation to any supply of goods or services by one member of a group to another unless both the body making the supply and the body supplied continue to be members of that group until—

(a) in the case of a supply of goods which are to be removed in pursuance of the supply, a time after the removal;
(b) in the case of any other supply of goods, a time after the goods have been made available, in pursuance of the supply, to the body supplied; or
(c) in the case of a supply of services, a time after the services have been performed.";

and in subsection ( 1)(b), for "other supply" there shall be substituted "supply which is a supply to which paragraph (a) above does not apply and is a supply".

(3) In subsection (5) (applications to be treated or to cease to be treated as members of a group etc.), for the words after paragraph (d) there shall be substituted—
unless the Commissioners refuse the application under subsection (5A) below.

(4) After subsection (5) there shall be inserted the following subsection—
(5A) If it appears to the Commissioners necessary to do so for the protection of the revenue, they may—

(a) refuse any application made to the effect mentioned in paragraph (a) or (c) of subsection (5) above; or
(b) refuse any application made to the effect mentioned in paragraph (b) or (d) of that subsection in a case that does not appear to them to fall within subsection (6) below."

(5) Subsection (2) above has effect in relation to—

(a) any supply made on or after 1st March 1995, and
(b) any supply made before that date in the case of which both the body making the supply and the body supplied continued to be members of the group in question until at least that date,

and subsections (3) and (4) above have effect in relation to applications made on or after the day on which this Act is passed.'.—[Mr. Heathcoat-Amory.]

Brought up, and read the First time.

Motion made, and Question proposed, That the clause be read a Second time.—[Mr. Heathcoat-Amory.]

Ms Dawn Primarolo: The proposals in the new clause are designed to counter a significant tax

avoidance scheme which has come to light. Indeed, in connection with the proposals, the Paymaster General wrote to my hon. Friend the Member for Oxford, East (Mr. Smith) on 28 February 1995 as follows:
The changes are designed to counter a significant tax avoidance scheme. The scheme exploits … recovery of input tax which would not normally be recoverable".
The Minister goes on to say that, because of a tribunal ruling,
in principle, there is nothing to prevent … the hitherto irrecoverable input tax charged to groups
from being recovered and running into several billion pounds. The Minister adds that that, if
allowed to flourish unchecked, would constitute an attack on the very integrity of the tax".
We welcome the proposals that are set out in the new clause but we seek clarification from the Paymaster General. He has written about an attack on the "integrity of the tax" if the clause does not become part of the Bill. Yet the VAT tribunal's decision was made on 21 December 1994. The Government did nothing until the new clause appeared on 28 February 1995. Why was there such a long gap? Has there been a loss of VAT revenue in the interim? If so, how much?
I hope that the Paymaster General will respond to some brief questions about the operation of the clause. Will Customs and Excise be able to make the VAT due at the time of exit from the group? At present, it does not appear to have the power to make regulations to change the time of supply in the circumstances that I have outlined. If the regulations are ultra vires, the law requires the VAT to be due from the period in which the pre-payment was made. In such a case, the retrospective nature of the law is in principle objectionable. It means that the VAT liability of supply can be changed by an event occurring after the supply is made. There may be arguments that the principle is contrary both to United Kingdom principles and to EC law. I ask the Paymaster General to explain how the Government will counter such arguments.
In the Minister's letter to my hon. Friend the Member for Oxford, East, he made it clear that the Government had not expected the VAT legislation to he interpreted in the way that it has been. He explained that that was why it was necessary to act promptly. It is questionable, however, whether the new provisions comply with EC law. There is nothing in article 4(4) of the sixth VAT directive to allow member states to change the time of supply for supplies between group members, or to treat group members as one taxable person in respect of some transactions but not of others. How do the Government intend to deal with that possible challenge?
The law will catch, perhaps unintentionally, pre-payments between group members where a company is leaving a VAT group because, for example, it has been sold. It will be vital for the group representative member to ensure that all intra-group payments made to and by that company are in respect of supplies that have already been made. Due to joint and several liability, the company leaving the group has a similar interest. Perhaps the Paymaster General will explain how he sees that problem being overcome.
There is also a problem with continuous supplies. These are normally supplies of services, but also of some goods. For example, when is the service of renting out a property "performed"? The service is not completed until the expiry or termination of the lease. Certainly this is likely


to be one sector in which pre-payments are common, rent usually being paid in advance. Customs and Excise may treat rent in particular as being pre-paid to the extent that it is in respect of periods after the degrouping. While not strictly supported by law, that would provide a reasonable solution for that type of pre-payment. However, it is more difficult to apply that principle to other continuous supplies that do not accrue evenly with time—for example, management and administration charges. How will interpretations be made in that respect and how shall we ensure that the new clause works effectively? I hope that the Paymaster General will respond.
Finally, confirmation is needed from Customs and Excise that a change of representative member does not mean that the group has changed. We presume that it will regard a group as the same group if the VAT registration number is unchanged.
The purpose behind the clause is to prevent tax avoidance. The Paymaster General has made it clear that if the loophole is not closed, the integrity of the tax and the tax base will be threatened. I hope that he will respond to the points and questions that I have raised.

Mr. Heathcoat-Amory: I shall gladly outline the reasons for the proposed change. It is undeniably rather complex but I shall describe it as simply as I can. I shall be pleased to go into further detail if any hon. Members of a technical disposition wish me to do so.
The essence of the new clause is the grouping provisions and their abuse. The House may know that the provisions were introduced when VAT was first introduced to simplify accounting by associated companies. Supplies between members of a VAT group are disregarded for VAT purposes. Only one VAT return has to be submitted by the representative member of the group instead of separate returns for each company. That is a long-standing, deregulatory measure that we would not normally wish to change.
Unfortunately, some groups—more exactly their professional advisers—believe that they have found a lawful way of manipulating the relevant provisions to avoid VAT, which individual members, if they were not grouped, would otherwise have to incur. That is the subject of litigation. The potential loss to the Exchequer is so serious that the Government have decided to bring forward the proposals that are set out in the clause to ensure that the clear intention of Parliament is respected for the future.
In the example of the scheme that has reached the VAT tribunal so far, the group concerned, knowing that VAT that is paid on cars is not normally deductible, used two subsidiaries to purchase cars and other goods. It seems that 90 per cent. of the price was paid VAT free in advance to the two companies. They promptly left the VAT group, purchased the cars and other goods and delivered them to a company that remained in the group. Apart from the VAT on the remaining 10 per cent. of the price, which was paid later, the group had obtained the cars tax free. The group freely admitted to the tribunal that the only reason for arranging the purchase in that way was to avoid tax.
Other groups have already put similar schemes on the starting blocks. About £50 million-worth of revenue is at stake awaiting the outcome of the current case, which is being appealed by Customs and Excise.
The new clause will amend the group legislation provision by preventing the type of supply that I have described—this answers the question of the hon. Member for Bristol, South (Ms Primarolo)—between members of a group being disregarded for VAT purposes. Therefore, VAT will have to be accounted for on its full value and the group will be able to recover only such part of the VAT as is properly deductible. That, again, was the clear intention of Parliament.
We are also taking this opportunity to extend the powers of Customs and Excise so that not only schemes of this kind, but any similar schemes which may seek to exploit the ability to move companies in and out of groups, can be rendered ineffective. Only the first change, which is aimed at the specific avoidance measure we found, is retrospective to the day after we announced the changes–1 March this year. The second change is not retrospective, but will give Customs and Excise the additional powers from Royal Assent.
5 pm
The hon. Member for Bristol, South asked me why we were introducing the new clause so late. It was only when the VAT tribunal decision was released, just before Christmas, that it was realised that action was necessary. We then had to evaluate precisely what that action should be. We had to take legal advice about whether our action would conflict with EC law; I can confirm to the hon. Lady that it does not. When all those things were done, we introduced the measure. We announced it to the House on 28 February, the draft new clause was made available and a press release was issued. As the hon. Lady has said, I wrote to the hon. Member for Oxford, East (Mr. Smith). Now, at the first opportunity, the measure is being brought before the House as a whole for confirmation as part of the Finance Bill.
When an avoidance scheme is admitted as such by the company concerned, the House does not need to ask itself whether it is really dealing with a legitimate business activity in accordance with parliamentary intention, as it is clear that this is not just an avoidance scheme, hut an extremely expensive one which could undermine revenue to a wholly unacceptable extent. Given those remarks, I hope that the House will endorse the Government's decision.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New clause 12

INTEREST ON GILT-EDGED SECURITIES PAYABLE WITHOUT DEDUCTION OF TAX

'. After section 51 of the Taxes Act 1988 there shall he inserted the following section—
Giltedged securities held under authorised arrangements

51A.—(1) Subject to the provisions of any regulations under section 51B, where gilt-edged securities of an eligible person are for the time being held under arrangements that satisfy the applicable requirements—

(a) those securities shall he deemed to have been issued subject to the condition that the interest on them is paid without deduction of income tax; and


(b) that interest shall be so paid accordingly, but shall be chargeable under Case III of Schedule D.

(2) For the purposes of this section gilt-edged securities are securities of an eligible person so long as—

(a) they are in the beneficial ownership of a company, local authority or local authority association or of any health service body (within the meaning of section 519A) and that company, authority, association or body is beneficially entitled to the interest on them;
(b) they are in the beneficial ownership of a person who does not fall within paragraph (a) above but is of any such description as may be prescribed by regulations made by the Treasury and that person is beneficially entitled to the interest on those securities;
(c) the circumstances in which they are held are such that any income from them is eligible for relief from tax by virtue of section 505(1)(c), or would be so eligible but for section 505(3);
(d) the circumstances in which they are held are such that any income from them is eligible for relief from tax by virtue of section 592(2), 608(2)(a), 613(4), 614(2), (3) or (4), 620(6) or 643(2);
(e) they are assets of any such trust fund as is referred to in section 83 of the Insurance Companies Act 1982 (premiums trust funds of members of Lloyd's); or
(f) the circumstances in which they are held are such that any income from them falls to be treated as the income of, or of the government of, a sovereign power or of an international organisation.

(3) For the purposes of this section the arrangements under which any gilt-edged securities are held shall be taken to satisfy the applicable requirements if—

(a) such conditions as may be imposed by or under any such regulations as may be made by the Treasury are satisfied in relation to those arrangements; and
(b) a declaration with respect to the satisfaction of those conditions has been made in accordance with any such regulations by such person having an entitlement to or in respect of the securities as may be determined under the regulations.

(4) The conditions that may, for the purposes of subsection (3)(a) above, be imposed by regulations under this section in relation to arrangements for the holding of any gilt-edged securities shall include—

(a) conditions as to the accounts in which the securities are to be held under the arrangements and as to the accounts into which interest on the securities is to be paid;
(b) conditions requiring persons holding the securities, or otherwise having functions under or in connection with the arrangements, to be persons of a description specified in the regulations or to be approved in accordance with the regulations;
(c) conditions requiring persons who, for purposes connected with the arrangements, act directly or indirectly—

(i) on behalf of the person beneficially entitled to the securities, or
(ii) on behalf of the person who holds them,
to be persons registered with the Board in accordance with the regulations; and

(d) conditions as to the provision about transfers of securities held under the arrangements that is to be contained in the arrangements.

(5) Regulations made by the Treasury for the purposes of this section may—

(a) impose requirements in relation to any such persons as are mentioned in subsection (4)(b) and (c) above with respect to the manner in which their functions under or in connection with the arrangements are exercised;

(b) require such persons—

(i) to consider the accuracy of any declaration made for the purposes of subsection (3)(b) above; and
(ii) themselves to make declarations as to the extent to which conditions or other requirements imposed for the purposes of this section appear to be, or to have been, satisfied or complied with;

(c) make provision—

(i) about the making of applications for approval or registration under any such regulations;
(ii) for the circumstances in which any approval or registration is to be or may be given or refused;
(iii) for the withdrawal or cancellation of any approval or registration;
(iv) for appeals against any refusal to grant an approval or to register any person, or against the withdrawal or cancellation of any approval or registration;

(d) make provision for the publication of information showing the effect of any determinations in pursuance of regulations made by virtue of paragraph (c) above;
(e) make provision for notices to be issued by the Board to such persons as may be described in the regulations where the Board are satisfied that this section has effect, or does not have effect, in relation to any gilt-edged securities;
(f) impose obligations–

(i) on persons having any rights in relation to gilt-edged securities held under arrangements described in the regulations,
(ii) on any such persons as are mentioned in subsection (4)(b) and (c) above, and
(iii) on persons who are applying to he approved or registered for the purposes of this section.

as to the provision of information, and the production of documents, to the Board or, on request, to an officer of the Board;
and
(g) impose requirements, framed wholly or partly by reference to the opinion of the Board, as to—

(i) the contents of any declaration to be made in accordance with regulations under this section,
(ii) the form and manner in which any declaration or information is to be made or provided in accordance with any such regulations, and
(iii) the keeping and production to, or to an officer of, the Board of any document in which any such declaration or information is contained.

(6) Any person who—

(a) contravenes, or fails to comply with, any requirement imposed on him by or under any regulations under this section, or
(b) fraudulently or negligently makes or produces any incorrect declaration, information or document in pursuance of any such requirement,
shall be liable to a penalty not exceeding £25,000.

(7) In this section 'gilt-edged securities' means any securities which—

(a) are gilt-edged securities for the purposes of the 1992 Act; or
(b) will be such securities on the making of any order under paragraph 1 of Schedule 9 to that Act the making of which is anticipated in the prospectus under which they were issued.

(8) In this section 'international organisation' means an organisation of which two or more sovereign powers, or the governments of two or more sovereign powers, are members; and if, in any proceedings, any question arises whether a person is an international organisation for the purposes of this section


a certificate issued by or under the authority of the Secretary of State stating any fact relevant to that question shall be conclusive evidence of that fact.

(9) Regulations made by the Treasury for the purposes of this section may—

(a) make different provision for different cases; and
(b) contain such supplementary, incidental, consequential and transitional provision as appears to the Treasury to be appropriate.

(10) This section shall not apply to any interest paid before such day as the Treasury may by order appoint, and different days may be appointed under this subsection for different purposes."'.—[Mr. Nelson.]

Brought up, and read the First time.

The Minister of State, Treasury (Mr. Anthony Nelson): I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Michael Morris): With this, it will be convenient to discuss also the following: Government new clause 11—Periodic accounting for tax on interest on gilt-edged securities.
Government new clause 10—Treatment of price differential on sale and repurchase of securities.
Government new clause 9—Manufactured interest on gilt-edged securities.
Government new clause 7—Power to make special provision for special cases.
Government new clause 8—Stock lending: power to modify rules.
Government amendment No. 15.

Mr. Nelson: The introduction of these new clauses comes after an informed and thorough debate in Committee on the issue of the gilt repo market. The six new clauses make the tax changes necessary to facilitate the introduction of an open market in the sale and repurchase of Government securities. It may be helpful to the House if I refer briefly to each of the new clauses and say a few words about their intent.
New clause 12 enables interest on gilt-edged securities, which at present is normally paid after deduction of tax, to be paid gross under arrangements to be set out in Treasury regulations and brought into effect on an appointed day, which is expected to be at the beginning of 1996.
New clause 11 enables regulations to be made to introduce a system of quarterly accounting for tax on gilt interest received gross. It is to be brought into effect on an appointed day, reflecting the date on which gilt interest first becomes payable gross under the arrangements provided for by new clause 12. This quarterly accounting system is necessary to contain the effect that paying gilt interest gross would otherwise have on the public sector borrowing requirement. The arrangements will reduce the cost from about £1.2 billion over two years to about £100 million in total.
New clause 10 ensures that the tax rules for the treatment of repos reflect the underlying economic reality of the transaction. It also prevents the risk of tax being lost by repos being used to turn income into capital. Because of the risk of loss of tax, the provisions will come into effect from Royal Assent.
New clause 9 makes the necessary amendments to existing legislation to enable manufactured payments of gilt interest to be paid gross in all circumstances, which will simplify the position considerably. It should in

particular assist the operation of the gilt repo market as participants will be able to make manufactured payments of gilt interest gross, regardless of the circumstances or identity of their counterpart.
The main purpose of new clause 7 is to provide regulatory powers to enable the operation of legislation affecting repos to take account of the detailed workings of the agreements under which these transactions are carried out. New clause 8 enables regulations to modify the circumstances in which transfers of security under stock lending arrangements are disregarded for tax purposes in computing the profits of the trade or in computing capital gains.
The new clauses will facilitate the introduction of an open gilt repo market by enabling gilt interest to be paid gross in a much wider range of circumstances than before. The Exchequer will be protected by the auditing regime for the new arrangements and by the new quarterly accounting system. The new clauses also provide for the price differential under a repo to be treated as interest for tax purposes and for consequential adjustments to be made to the capital gains tax rules. The new clauses provide regulatory powers to cater for the technical details of repo transactions and enable the tax rules to be modified in the light of market developments.

Mr. Alistair Darling: This is a far from satisfactory way in which to legislate on this or any other matter. Although, as we made clear in Committee, the Opposition generally support the introduction of a repo market, we are concerned that the Government have introduced at this late stage some complex new clauses which provide for further regulations to be made to deal with matters which may be technical, but which are crucial to a number of taxpayers. That is not a satisfactory way in which to legislate, especially when one considers that in the next two days we have to consider 28 different groups of amendments and new clauses. Inevitably, the new clauses dealing with the repo market will not get the attention that they would otherwise have had.
That said, I accept that the Government are anxious to get the market under way at the beginning of next year and we shall not vote against the new clauses. However, the difficulties raised by legislating in this way are perhaps summed up by new clause 12, which provides that anyone who
contravenes, or fails to comply with, any requirement … under this section … shall be liable to a penalty not exceeding £25,000.
That is a very stiff penalty. Taxpayers may come to the view that it is not fair for Parliament to pass legislation with little consideration and then expect taxpayers to comply with it, with a penalty of £25,000 if they get it wrong. As was said time and again in Committee, the Government should think long and hard about the approach that they are increasingly adopting towards legislating in areas where there are complications and where far greater consideration should be given to ensuring that the regime is correct.
Can the Minister tell us whether unit trusts come within the new regime as it is not entirely clear whether they do? Point 7 of the annexe to the Treasury press release makes it clear that bodies which hold gilts but have no intention of entering into repos will he permitted to transfer their gilts to the new regime to obtain a cash flow advantage.


If that is right, what will the cost be to the Treasury? There is a suggestion that that might be a generous, perhaps unintended, consequence of the legislation.
As I have said, we generally support the thrust of what the Government are trying to do, but we believe that they must think long and hard about the way in which they have approached the matter. The introduction of so many complex new clauses and the prospect of complex regulations cannot be happy, especially for all those who will have to make the system operate.

Mr. Nelson: I am at least grateful to the hon. Member for Edinburgh, Central (Mr. Darling) for giving what I took to be a welcome for the intent behind the new clauses and, therefore, implicitly for the considerable saving that will arise for the taxpayer who will, we hope, have to pay a far lower amount of interest on the overall amount of the national debt and on the issuance of new gilts. We should not be introducing the new clauses unless we thought—indeed, the market concurs—that there would be very considerable savings for the taxpayer.
I am sorry that the hon. Gentleman finds the new clauses complex, but we had an opportunity in Committee to discuss in considerable detail the intent behind them. I acknowledge that the translation of that intent into practice, not only in the new clauses but in subsequent regulations, the code of practice and the legal agreements, involve some complexity. That is probably inevitable in a developing, innovative market of this nature where substantial amounts of interest and, therefore, potential tax are involved.
The consultations on the introduction of an open gilt market did not end until the end of January this year. The Government then needed to consider the responses made and decide whether to go ahead and what changes were needed. By that time, it was too late for the necessary legislation to be introduced during the Committee stage. It is essential that tax changes are made in the Bill if an open repo market in Government securities such as already exists in many other countries is to be introduced early in 1996.
In answer to the hon. Gentleman's specific point about the £25,000 penalty, the Inland Revenue will have to audit the scheme to ensure that gilt holders make the proper declarations and that they are eligible before the central gilts office member can hold their gilts in a special account. Those holding gilts directly through a CGO member will make their declaration to that CGO member. Otherwise, the declaration is made to a registered intermediary, who in turn makes a declaration to the CGO member.
The Inland Revenue will audit the scheme to check that only eligible persons are obtaining gilt interest gross and that all the requirements of the scheme have been met. In view of the large amount of interest which may be involved, there will be a mitigable penalty not exceeding £25,000 for any failure to comply with the legislation. I hope that the hon. Member for Oxford, East (Mr. Smith) and his party, which professes concern to defend revenue, prevent loopholes and crack down on those who seek to exploit them, will support a sensible penalty regime which is consistent, commensurate with the size of the transactions taking place and sufficient to provide real deterrence in relation to operation outside the scheme.
The answer to the hon. Gentleman's question about unit trusts is yes, unit trusts are involved. The hon. Gentleman asked about bodies which could join the repo market to register with starred special accounts in the CGO which did not necessarily intend to participate in the repo market but thereby obtained gross payments purely for cash flow purposes. The answer is that the cash flow cost of that is included in the overall assessment of £100 million made for the cash flow cost of players and non-players in the repo market. The amount of interest or the tax forgone for a short while on interest in respect of non-players and players in the repo market is, frankly, a guesstimate. The figure of £100 million is an estimate rather than a guesstimate, but it will be within the total already announced.
While I have not provided an exact answer to the last point raised by the hon. Gentleman, I hope that I have reassured him that we have already taken his point into account in the cost. I emphasise that it is a cash flow cost and not a real cost. We hope that at the end of the day the measure will be an extremely positive sum gain for the taxpayer.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New clause 11

PERIODIC ACCOUNTING FOR TAX ON INTEREST ON GILT-EDGED SECURITIES

`.—(1) After the section 51A of the Taxes Act 1988 inserted by section (Interest on gilt-edged securities payable without deduction of tax) above there shall be inserted the following section—
Periodic accounting for tax on interest on giltedged securities

51B.—(l) The Treasury may by regulations provide for persons to whom payments of interest on relevant gilt-edged securities are made without deduction of tax to be required to make periodic returns to an officer of the Board of—

(a) amounts of any payments of such interest made to that person, and
(b) amounts of tax for which, assuming the payments to bear tax at the basic rate for the relevant year of assessment, that person is to be accountable under the regulations in respect of those payments;

and any such regulations may further provide for the amounts of tax required to be included in any such return to become due, at the time when the return is required to be made, from the person required to make it.

(2) Regulations made by the Treasury for the purposes of this section may—

(a) specify such periods as the Treasury may consider appropriate as the periods for which returns are to be made, and in respect of which any person is to account for tax, under the regulations;
(b) make provision for enabling returns under the regulations to be combined with returns under Schedule 16 and for requiring particulars of claims and calculations made for the purposes of the regulations to be set out in the returns;
(c) provide, in respect of any period for which a return is to be made by any person under the regulations, for that person to be obliged, before the end of the period, to make a payment on account of amounts that may become due from him in respect of that period;
(d) impose a requirement for a special return to he made for the purposes of any obligation imposed by virtue of paragraph (c) above;


(e) provide for the amount which, under the regulations, is to be due from any person in respect of any period to be reduced by reference to amounts which—

(i) are paid by or on behalf of that person under contracts or arrangements relating to transfers of gilt-edged securities; and
(ii) are or fall to be treated as representative of interest on those securities:

(f) authorise amounts in respect of which there is an obligation to account for tax under the regulations to be treated for specified purposes of the Tax Acts as payments on which a person has borne income tax by deduction;
(g) make provision for the assessment of amounts due under the regulations and for the repayment in specified circumstances of amounts paid under the regulations;
(h) make provision for interest to be payable, at such rate as may be determined by or under the regulations, on amounts that have become due under the regulations but have not been paid;
(i) make provision, where payments of interest on any relevant gilt-edged securities would be comprised in the income of a member of Lloyd's, for obligations that may be imposed by regulations under this section on the person to whom the interest is paid to be imposed, instead, on such other person as may be described in the regulations.

(3) Regulations made by the Treasury for the purposes of this section may—

(a) include provision which for the purposes of the regulations makes any provision corresponding, with or without modifications, to any of the provisions of Schedule 16;
(b) make provision modifying the operation of Schedule 19AB in relation to cases where payments of interest on relevant gilt-edged securities are made without deduction of tax to companies carrying on pension business;
(c) include provision which requires obligations and liabilities under the regulations to be treated as obligations and liabilities to which provisions of Schedule 23 to the Finance Act 1995 (UK representatives) apply; and
(d) include provision which, for any of the purposes of the regulations, applies provisions of sections 118 and 119 of and Schedule 23 to that Act in relation to times before those provisions otherwise come into force.

(4) Regulations made by the Treasury for the purposes of this section may—

(a) make different provision for different cases; and
(b) contain such supplementary, incidental, consequential and transitional provision as appears to the Treasury to be appropriate;

and subsection (3) of section 178 of the Finance Act 1989 (extent of powers to set rates of interest) shall apply for the purposes of the power conferred by virtue of subsection (2)(h) above as it applies for the purposes of the power to make regulations under that section.

(5) In this section 'relevant gilt-edged securities' means securities which are gilt-edged securities within the meaning of section 51 A, other than any to which a direction of the Treasury under section 50 relates.

(6) In this section 'relevant year of assessment'—

(a) in relation to a manufactured payment, means the year of assessment in which it is received by the person to whom it is paid; and
(b) in relation to any other payment of interest, means the year of assessment in which the payment is made;

and in this subsection 'manufactured payment' means any payment which for the purposes of Schedule 23A is a payment of manufactured interest."

(2) In the Table in section 98 of the Management Act (penalties in respect of certain information provisions), immediately before the entry in the second column relating to section 124(3) of the Taxes Act 1988 there shall be inserted the following entry—
regulations under section 51B;".'.—[Mr. Nelson.]

Brought up, read the First and Second time, and added to the Bill.

New clause 10

TREATMENT OF PRICE DIFFERENTIAL ON SALE AND REPURCHASE OF SECURITIES

'.—(1) After section 730 of the Taxes Act 1988 there shall be inserted the following sections—
Treatment of price differential on sale and repurchase of securities

730A.—(1) Subject to subsection (8) below, this section applies where—

(a) a person ('the original owner') has transferred any securities to another person (`the interim holder') under an agreement to sell them;
(b) the original owner or a person connected with him is required to buy them back either—

(i) in pursuance of an obligation to do so imposed by that agreement or by any related agreement, or
(ii) in consequence of the exercise of an option acquired under that agreement or any related agreement;
and
(c) the sale price and the repurchase price are different.

(2) The difference between the sale price and the repurchase price shall be treated for the purposes of the Tax Acts—

(a) where the repurchase price is more than the sale price, as a payment of interest made by the repurchaser on a deemed loan from the interim holder of an amount equal to the sale price; and
(b) where the sale price is more than the repurchase price, as a payment of interest made by the interim holder on a deemed loan from the repurchaser of an amount equal to the repurchase price.

(3) Where any amount is deemed under subsection (2) above to be a payment of interest, that payment shall be deemed for the purposes of the Tax Acts to be one that becomes due at the time when the repurchase price becomes due and, accordingly, is treated as paid when that price is paid.

(4) Where any amount is deemed under subsection (2) above to be a payment of interest, the repurchase price shall be treated for the purposes of the Tax Acts (other than this section and sections 737A and 737C) and (in cases where section 263A of the 1992 Act does not apply) for the purposes of the 1992 Act—

(a) in a case falling within paragraph (a) of that subsection, as reduced by the amount of the deemed payment; and
(b) in a case falling within paragraph (b) of that subsection, as increased by the amount of the deemed payment.

(5) For the purposes of section 209(2)(d) and (da) any amount which is deemed under subsection (2)(a) above to be a payment of interest shall be deemed to be interest in respect of securities issued by the repurchaser and held by the interim holder.

(6) Any amount which—

(a) is deemed under subsection (2) above to he a payment of interest, and
(b) does not fall (apart from this subsection) to he treated as yearly interest,

shall be treated for the purposes of section 338 as if the reference to yearly interest in subsection (3)(a) of that section included a reference to that amount.

(7) The Treasury may by regulations provide for any amount which is deemed under subsection (2) above to be received as a payment of interest to be treated, in such circumstances and to such extent as may be described in the regulations, as comprised in income that is eligible for relief from tax by virtue of section 438, 592(2), 608(2)(a), 613(4), 614(2), (3) or (4), 620(6) or 643(2).

(8) Except where regulations under section 737E otherwise provide, this section does not apply if—

(a) the agreement or agreements under which provision is made for the sale and repurchase are not such as would be entered into by persons dealing with each other at arm's length; or
(b) all of the benefits or risks arising from fluctuations, before the repurchase takes place, in the market value of the securities sold accrue to, or fall on, the interim holder.

(9) In this section references to the repurchase price are to be construed—

(a) in cases where section 737A applies, and
(b) in cases where section 737A would apply if it were in force in relation to the securities in question,
as references to the repurchase price which is or, as the case may be, would be applicable by virtue of section 737C(3)(b), (9) or (11)(c).

Interpretation of section 730A

730B.—(l) For the purposes of section 730A agreements are related if they are entered into in pursuance of the same arrangement (regardless of the date on which either agreement is entered into).

(2) References in section 730A to buying back securities—

(a) shall include references to buying similar securities; and
(b) in relation to a person connected with the original owner, shall include references to buying securities sold by the original owner or similar securities,
notwithstanding (in each case) that the securities bought have not previously been held by the purchaser; and references in that section to repurchase or to a repurchaser shall be construed accordingly.

(3) In section 730A and this section 'securities' has the same meaning as in section 737A.

(4) For the purposes of this section securities are similar if they entitle their holders—

(a) to the same rights against the same persons as to capital, interest and dividends, and
(b) to the same remedies for the enforcement of those rights,
notwithstanding any difference in the total nominal amounts of the respective securities or in the form in which they are held or the manner in which they can be transferred.

(5) Section 839 (connected persons) applies for the purposes of section 730A."

(2) In section 729 of that Act (sale and repurchase of securities), after subsection (5) there shall be inserted the following subsection—
(5A) This section shall not apply where section 737A applies; and this section shall be disregarded in determining whether the condition in subsection (2)(b) of that section is fulfilled in any case.

(3) In subsections (3)(b), (9) and (11)(c) of section 737C of that Act (adjustment of repurchase price), for "the Tax Acts other than section 737A and of the 1992 Act" there shall be substituted, in each case "section 730A"; and after subsection (11) of that section there shall be inserted the following subsection—
(11A) The deemed increase of the repurchase price which is made for the purposes of section 730A by subsection (3)(b), (9) or (11)(c) above shall also have effect—

(a) for all the purposes of the Tax Acts, other than section 737A.

(b) in cases where section 263A of the 1992 Act does not apply, for the purposes of the 1992 Act,

wherever in consequence of that increase there is for the purposes of section 730A no difference between the sale price and the repurchase price.

(4) After section 263 of the Taxation of Chargeable Gains Act 1992 there shall be inserted the following section—

Agreements for sale and repurchase of securities

263A.—(1) Subject to subsections (2) to (4) below, in any case falling within subsection (1) of section 730A of the Taxes Act (treatment of price differential on sale and repurchase of securities) and in any case which would fall within that subsection if the sale price and the repurchase price were different—

(a) the acquisition of the securities in question by the interim holder and the disposal of those securities by him to the repurchaser; and
(b) except where the repurchaser is or may be different from the original owner, the disposal of those securities by the original owner and any acquisition of those securities by the original owner as the repurchaser,

shall be disregarded for the purposes of capital gains tax.

(2) Subsection (1) above does not apply in any case where the repurchase price of the securities in question falls to be calculated for the purposes of section 730A of the Taxes Act by reference to provisions of section 737C of that Act that are not in force in relation to those securities when the repurchase price becomes due.

(3) Subsection (1) above does not apply if—

(a) the agreement or agreements under which provision is made for the sale and repurchase are not such as would be entered into by persons dealing with each other at arm's length; or
(b) any of the benefits or risks arising from fluctuations, before the repurchase takes place, in the market value of the securities sold accrues to, or falls on, the interim holder.

(4) Subsection (1) above does not apply in relation to any disposal or acquisition of qualifying corporate bonds in a case where the securities disposed of by the original owner or those acquired by him, or by any other person, as the repurchaser are not such bonds.

(5) Expressions used in this section and in section 730A of the Taxes Act have the same meanings in this section as in that section."

(5) This section shall have effect where the agreement to sell the securities is entered into on or after the date on which this Act is passed.'.—[Mr. Nelson.]

Brought up, read the First and Second time, and added to the Bill.

New clause 9

MANUFACTURED INTEREST ON GILT-EDGED SECURITIES

'.—(1) In section 737 of the Taxes Act 1988 (manufactured dividends and interest)—

(a) after subsection (1A) there shall be inserted the following subsection—

(1B) Subject to subsection (5AA) below, subsection (1) above shall not apply where the interest in question is interest on gilt-edged securities.";

(b) at the beginning of subsections (2) and (5), there shall be inserted, in each case, "Subject to subsection (5AA) below,";
(c) after subsection (5) there shall be inserted the following subsection—

(5AA) Regulations made by the Treasury may make provision in relation to any such case where the securities in question are gilt-edged securities as may be specified in the regulations—



(a) for subsections (1B), (2) and (5) above to be disregarded in determining whether the case is one where subsection (1) above applies; or
(b) for this section to have effect as if subsections (1B) and (2) above were omitted and the words in subsection (5) from 'unless' to the end of paragraph (b) were modified in such manner as may be set out in the regulations.";
and

(d) in subsection (6), after the definition of "foreign income dividend" there shall be inserted the following definition—
'gilt-edged securities' has the same meaning as in section 51A;".

(2) In Schedule 23A to that Act, at the beginning of sub-paragraphs (2) and (3) of paragraph 3, there shall be inserted, in each case, "Subject to paragraph 3A below,"; and after that paragraph there shall be inserted the following paragraph—
3A.—(1) This paragraph applies, except in so far as dividend manufacturing regulations otherwise provide, in any case where paragraph 3 above applies and the United Kingdom securities in question are gilt-edged securities.

(2) In a case where this paragraph applies, sub-paragraphs (2) and (3) of paragraph 3 above shall not have effect, but the gross amount of the manufactured interest shall be treated—

(a) in relation to the interest manufacturer, for all the purposes of the Tax Acts except the determination of whether a deduction of tax is liable to be made on the making of the manufactured payment, and
(b) in relation to the recipient and all persons claiming title through or under him, for all the purposes of those Acts,

as if it were the gross amount of a periodical payment of interest on those gilt-edged securities, but made by the interest manufacturer.
(3) Sub-paragraph (4) of paragraph 3 above shall apply for the purposes of this paragraph as it applies for the purposes of that paragraph.
(4) In this paragraph 'gilt-edged securities' has the same meaning as in section 51A."

(3) In paragraph 5(6) of that Schedule (construction of references to securities in provisions relating to interest passing through the market), after "United Kingdom securities" there shall be inserted ", other than gilt-edged securities (within the meaning of section 51A),".

(4) This section shall have effect in relation to any payments made on or after such day as the Treasury may by order appoint, and different days may be appointed under this subsection for different purposes.'.—[Mr. Nelson.]

Brought up, read the First and Second time, and added to the Bill.

New clause 7

POWER TO MAKE SPECIAL PROVISION FOR SPECIAL CASES

'.—(1) Immediately before section 738 of the Taxes Act 1988 there shall be inserted the following sections—
Power to provide for manufactured payments to be eligible for relief

737D.—(1) The Treasury may by regulations provide for any manufactured payment made to any person to be treated, in such circumstances and to such extent as may be described in the regulations, as comprised in income of that person that is eligible for relief from tax by virtue of section 438, 592(2), 608(2)(a), 613(4), 614(2), (3) or (4), 620(6) or 643(2).

(2) In this section 'manufactured payment' means any manufactured dividend, manufactured interest or manufactured overseas dividend, within the meaning of Schedule 23A.

Power to modify sections 727A, 730A and 737A to 737C

737E—(1) The Treasury may by regulations make provision for all or any of sections 727A, 730A and 737A to 737C to have effect with modifications in relation to cases involving any arrangement for the sale and repurchase of securities where—

(a) the obligation to make the repurchase is not performed or the option to repurchase is not exercised;
(b) provision is made by or under any agreement for different or additional securities to be treated as, or as included with, securities which, for the purposes of the repurchase, are to represent securities transferred in pursuance of the original sale;
(c) provision is made by or under any agreement for any securities to be treated as not included with securities which, for the purposes of the repurchase, are to represent securities transferred in pursuance of the original sale;
(d) provision is made by or under any agreement for the sale price or repurchase price to be determined or varied wholly or partly by reference to fluctuations, occurring in the period after the making of the agreement for the original sale, in the value of securities transferred in pursuance of that sale, or in the value of securities treated as representing those securities; or
(e) provision is made by or under any agreement for any person to be required, in a case where there are any such fluctuations, to make any payment in the course of that period and before the repurchase price becomes due.

(2) The Treasury may by regulations make provision for all or any of sections 727A, 730A and 737A to 737C to have effect with modifications in relation to cases where—

(a) arrangements, corresponding to those made in cases involving an arrangement for the sale and repurchase of securities, are made by any agreement, or by one or more related agreements, in relation to securities that are to be redeemed in the period after their sale; and
(b) those arrangements are such that the person making the sale or a person connected with him (instead of being required to repurchase the securities or acquiring an option to do so) is granted rights in respect of the benefits that will accrue from their redemption.

(3) The Treasury may by regulations provide that section 730A is to have effect with modifications in relation to cases involving any arrangement for the sale and repurchase of securities where there is an agreement relating to the sale or repurchase which is not such as would be entered into by persons dealing with each other at arm's length.

(4) The powers conferred by subsections ( 1 ) and (2) above shall be exercisable in relation to section 263A of the 1992 Act as they are exercisable in relation to section 730A of this Act.

(5) Regulations made for the purposes of this section may—

(a) make different provision for different cases; and
(b) contain such supplementary, incidental, consequential and transitional provision as appears to the Treasury to be appropriate.

(6) The supplementary, incidental and consequential provision that may be made by regulations under this section shall include—

(a) in the case of regulations relating to section 730A, provision modifying subsections (3)(b), (9), (11)(c) and (11A) of section 737C; and
(b) in the case of regulations relating to section 263A of the 1992 Act, provision modifying the operation of that Act in relation to cases where by virtue of the regulations any acquisition or disposal is excluded from those which are to be disregarded for the purposes of capital gains tax.

(7) In this section 'modifications' includes exceptions and omissions; and any power under this section to provide for an


enactment to have effect with modifications in any case shall include power to provide for it not to apply (if it otherwise would do) in that case.

(8) References in this section to a case involving an arrangement for the sale and repurchase of securities are references to any case where—

(a) a person makes a sale of any securities under any agreement ('the original sale'); and
(b) that person or a person connected with him either—

(i) is required under that agreement or any related agreement to buy them back; or
(ii) acquires, under that agreement or any related agreement, an option to buy them back.

(9) Section 730B shall apply for the purposes of this section as it applies for the purposes of section 730A."

(2) In section 182(1) of the Finance Act 1993 and section 229 of the Finance Act 1994 (powers to modify provisions relating to Lloyd's), the following paragraph shall be inserted, in each case, after paragraph (c)—
(ca) for modifying the application of this Chapter in relation to cases where assets forming part of a premiums trust fund are the subject of—

(i) any such arrangement as is mentioned in section 129(1), (2) or (2A) of the Taxes Act 1988 (stock lending etc.); or
(ii) any such arrangements or agreements as are mentioned in section 737E(2) and (8) of the Taxes Act 1988 (sale and repurchase of securities etc.);".'.—[Mr. Nelson.]

Brought up, read the First and Second time, and added to the Bill.

New clause 8

STOCK LENDING: POWER TO MODIFY RULES

'.—(1) In subsection (1) of section 129 of the Taxes Act 1988 (description of stock lending arrangements)—

(a) for "subsection (4)" there shall be substituted "subsections (2B) and (4)"; and
(b) the words "has contracted to sell securities, and to enable him to fulfil the contract, he" shall be omitted.

(2) In subsection (2A) of that section, for "A to fulfil his contract" there shall be substituted "B to make the transfer to A or his nominee".

(3) After subsection (2A) of that section there shall be inserted the following subsection—
(2B) Except in so far as the Treasury by regulations otherwise provide, this section applies only if A enters into the arrangement mentioned in subsection (1) above to enable him to fulfil a contract under which he is required to sell securities.

(4) After subsection (4) of that section there shall be inserted the following subsections—
(4A) Regulations under subsection (4) above relating to section 271(9) of the 1992 Act may include provision modifying the operation of that Act in relation to cases where, by virtue of the regulations, any acquisition or disposal is excluded from those which are to be disregarded for the purposes of capital gains tax.
(4B) In such cases as the Treasury may by regulations provide, this section shall have effect as if references to a transfer of securities of the same kind and amount as those subject to a previous transfer included references to the grant of equivalent rights in respect of benefits accruing from the redemption of securities of the same kind and amount.

(5) For subsection (9) of section 271 of the Taxation of Chargeable Gains Act 1992 (exemption for arrangements to which section 129 applies) there shall be substituted the following subsection—
(9) Subject to any regulations under subsection (4) of section 129 of the Taxes Act, any disposal and acquisition made in pursuance of an arrangement mentioned in subsection
(1). (2) or (2A) of that section shall be disregarded for the

purposes of capital gains tax unless it is one in the case of which subsection (2B) of that section has the effect of preventing that section from applying.—[Mr. Nelson.]

Brought up, read the First and Second time, and added to the Bill.

New clause 13

ANNUITIES PURCHASED WHERE CERTAIN CLAIMS OR ACTIONS ARE SETTLED

`The following sections shall be inserted after section 329 of the Taxes Act 1988—
Annuities purchased for certain persons

329A.—(l) In a case where—

(a) an agreement is made settling a claim or action for damages for personal injury,
(b) under the agreement the damages are to consist wholly or partly of periodical payments, and
(c) under the agreement the person entitled to the payments is to receive them as the annuitant under one or more annuities purchased for him by the person against whom the claim or action is brought or, if he is insured against the claim concerned, by his insurer,

the agreement is for the purposes of this section a qualifying agreement.

(2) In a case where—

(a) an agreement is made settling a claim or action for damages for personal injury,
(b) under the agreement the damages are to consist wholly or partly of periodical payments, and
(c) a later agreement is made under which the person entitled to the payments is from a future date to receive them as the annuitant under one or more annuities purchased for him by the person against whom the claim or action is brought or, if he is insured against the claim concerned, by his insurer,

the agreement mentioned in paragraph (c) above is for the purposes of this section a qualifying agreement.

(3) Subsection (4) below applies where—

(a) a person receives a sum as the annuitant under an annuity purchased for him pursuant to a qualifying agreement, or
(b) a person receives a sum on behalf of the annuitant under an annuity purchased for the annuitant pursuant to a qualifying agreement.

(4) Where this subsection applies the sum shall not be regarded as the recipient's or annuitant's income for any purposes of income tax and accordingly shall be paid without any deduction under section 349(1).

(5) Subsections (6) to (10) below apply for the purposes of subsection (1) above.

(6) The periodical payments may be for the life of the claimant, for a specified period or of a specified number or minimum number or include payments of more than one of those descriptions.

(7) The amounts of the periodical payments (which need not be at a uniform rate or payable at uniform intervals) may be—

(a) specified in the agreement, with or without provision for increases of specified amounts or percentages,
(b) subject to adjustment in a specified manner so as to preserve their real value, or
(c) partly specified as mentioned in paragraph (a) and partly subject to adjustment as mentioned in paragraph (b) above.

(8) The annuity or annuities must be such as to provide sums which as to amount and time of payment correspond to the periodical payments described in the agreement.

(9) Personal injury includes any disease and any impairment of a person's physical or mental condition.

(10) A claim or action for personal injury includes—



(a) such a claim or action brought by virtue of the Law Reform (Miscellaneous Provisions) Act 1934;
(b) such a claim or action brought by virtue of the Law Reform (Miscellaneous Provisions) Act (Northern Ireland) 1937;
(c) such a claim or action brought by virtue of the Damages (Scotland) Act 1976;
(d) a claim or action brought by virtue of the Fatal Accidents Act 1976;
(e) a claim or action brought by virtue of the Fatal Accidents (Northern Ireland) Order 1977.

(11) For the purposes of subsection (2) above—

(a) subsections (6), (9) and (10) above apply;
(b) subsection (7) above applies as if the reference to the agreement were to that mentioned in subsection (2)(a) above;
(c) subsection (8) above applies as if the reference to periodical payments described in the agreement were to periodical payments described in the agreement mentioned in subsection (2)(a) above and falling to be made after the later agreement takes effect.

(12) This section does not apply unless the sum concerned is received after the day on which the Finance Act 1995 is passed, but it is immaterial when—

(a) the agreement mentioned in subsection (1) above is made or takes effect, or
(b) either of the agreements mentioned in subsection (2) above is made or takes effect.

Annuities assigned in favour of certain persons

329B.—(1) In a case where—

(a) an agreement is made settling a claim or action for damages for personal injury,
(b) under the agreement the damages are to consist wholly or partly of periodical payments,
(c) the person against whom the claim or action is brought (or, if he is insured against the claim concerned, his insurer) purchases one or more annuities, and
(d) a later agreement is made under which the annuity is, or the annuities are, assigned in favour of the person entitled to the payments so as to secure that from a future date he receives the payments as the annuitant under the annuity or annuities,

the agreement mentioned in paragraph (d) above is for the purposes of this section a qualifying agreement.

(2) Subsection (3) below applies where—

(a) a person receives a sum as the annuitant under an annuity assigned in his favour pursuant to a qualifying agreement, or
(b) a person receives a sum on behalf of the annuitant under an annuity assigned in the annuitant's favour pursuant to a qualifying agreement.

(3) Where this subsection applies the sum shall not be regarded as the recipient's or annuitant's income for any purposes of income tax and accordingly shall be paid without any deduction under section 349(1).

(4) For the purposes of subsection (1) above—

(a) subsections (6), (9) and (10) of section 329A apply;
(b) subsections (7) and (8) of section 329A apply as if references to the agreement were to that mentioned in subsection (1)(a) above.

(5) This section does not apply unless the sum concerned is received after the day on which the Finance Act 1995 is passed, but it is immaterial when either of the agreements mentioned in subsection (1) above is made or takes effect." '—[Sir George Young.]

Brought up, and read the First time.

The Financial Secretary to the Treasury (Sir George Young): I beg to move, That the clause be read a Second time. 
The object of this clause is to simplify the administration of the payment of agreed damages in cases of personal injury, where the damages are to be paid to the victim of the injury in instalments over a period or for his or her life. It will make it possible for the victim of the injury to receive the damages as an annuity directly from a life insurance company without turning a non-taxable capital sum into income chargeable to tax.
The payment of an annuity directly to the victim of the injury will bring the advantage of protection under the Policyholders Protection Act 1975. Uncertainties as to the long-term financial stability of the payer of the damages will no longer be a significant obstacle to the acceptance of damages in a form which meets the long-term financial needs of the victim.
The clause achieves the objectives of the measure tabled by the hon. Member for Oxford, East (Mr. Smith) in Committee and will, I know, have the support of the whole House. It also represents a first step towards realising our intention, announced to the House on 23 March, of implementing the recommendations made by the Law Commission in its report on structured settlements and interim and provisional damages.
Additionally, the clause breaks new ground by making it possible for existing structured settlements to he renegotiated to come within the new framework. This offers the advantages of long-term security for the individual receiving the damages by instalment payments and of administrative savings for the insurance company paying them. The removal of the territorial restrictions from the measures previously proposed will, we hope, make it easier for an individual suffering an injury when overseas to obtain damages payable through life without taxation disadvantages.
I hope that the measure commends itself to the House.

Mr. Andrew Smith: I am grateful to the Financial Secretary for acknowledging the role that the Labour party and the Law Commission played in proposing the measure. It is a good measure for all the reasons that the Minister set out, which I do not intend to repeat. It will bring considerable benefit to the victims of accidents and those who suffer injuries. It will stimulate competition in the range of financial instruments which are available to them. It will provide for annuities structured specifically to the varying needs that victims have for the rest of their lives following a severe accident or injury. We welcome the new clause and commend it to the House.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New clause 1

DISCRETIONARY SHARE OPTION SCHEMES IN THE PRIVATISED UTILITIES

'.—(1) The Treasury shall present to Parliament for its approval before the next Budget a report on discretionary share option schemes operated by the privatised utilities which fall within Part IV of Schedule 9 to the Taxes Act 1988 (share options schemes other than savings-related share Option schemes) (-the schemes").

(2) The Treasury shall report to Parliament on the past and estimated future effects on the public revenues of schemes which are operated by the privatised utilities.

(3) The report shall differentiate between public revenues raised from:

(a) members of these schemes and
(b) the privatised utilities which operate these schemes.

(4) For the purposes of this section privatised utilities will include all companies which produce or distribute water, gas, or electricity in which HMG has sold shares since 1979 and will include other companies which the Treasury may by order determine.'.—[Mr. Andrew Smith.]

Brought up, and read the First time.

Mr. Andrew Smith: I beg to move, That the clause be read a Second time.
I fear that this new clause will not be so uncontentious as the last one. I would be grateful if the Financial Secretary would nod across the Dispatch Box. We would be pleased to move on, once the Government had accepted it. The Minister is not making any such indication.
The new clause calls for an assessment of the costs to the taxpayer incurred in Government support for discretionary share option schemes in the privatised utilities, and for a report to Parliament before the next Budget. Our case is that such an assessment is long overdue, that the boardroom excesses of the privatised utilities are a national scandal, and that it is high time that the Government took action. I find it difficult to imagine who could possibly disagree with such a reasonable suggestion as that which we are making today—other than perhaps sonic of the beneficiaries, and some right hon. and hon. Members on the Conservative Benches.
Certainly, anyone with an intelligent experience in commerce would be appalled at any enterprise which spent large sums of money without assessing the value created. Yet that is just what the Government are doing. They are underwriting the handouts at the taxpayers' expense. We seek no less prudent supervision of matters involving the public purse.
As has been especially clear in recent months, the 13ritish people are fed up with the Government's excuses and double standards in regard to share options and the excesses of the privatised utilities. They want not mere words—such as the Prime Minister's admission that he found such abuses "distasteful"—but action. Families with ordinary incomes whose living standards fell last year and are falling now, and must pay an extra £812 in tax this year, are angry ahout the ahuses at the top.
The Government should deal with these scandals. The chairman of the National Grid Company is set to make £2 million this year; the chief executive of British Gas has been awarded a 75 per cent. increase in his basic annual salary—an extra £205,000. That is on top of the share options, amounting to more than £100 million, taken out in the privatised utilities alone last year.
The Prime Minister has said that the Government may consider acting after the Greenbury committee has reported—indeed, that they may take legislative action. Even since that statement, however, three directors of Norweb alone have exercised share options netting them a combined benefit of more than £1 million. That will do nothing to make the public feel confident that the Government have any intention of ending the excesses of privatised industries.
We have set out the action that needs to he taken. The regulation of water, gas, electricity and telecommuni-cations must be made open: there must be public hearings enabling customers to question the privatised utilities about their service to the public, and about profits and boardroom pay, before the prices are set. Regulators should have the power to cut prices in the event of "top pay" and share option abuses.

Mr. Deputy Speaker: Order. The hon. Gentleman is straying rather wide of the new clause.

Mr. Smith: I was just coming to the part of the new clause that deals with the effects on revenue, Mr. Deputy Speaker. Those effects are considerable. We also want executive share options to be taxed as income to discourage abuse.
It is high time that the Government listened to the public, and ended the indefensible position in which there is one rule for the few and another for the many. These discretionary share options are very expensive to the public purse: even the Government estimate that the cost to the taxpayer in the financial year that is now ending was some £60 million. That is a large amount, even if it is an underestimate—as we have argued it is, because it does not take account of all the opportunities for tax planning and avoidance.
Surely it is right to ask, as our new clause does, how such schemes affect the public purse and what public benefits they produce. I look forward to hearing from the Financial Secretary exactly what benefit the public are receiving in return for the huge handouts involved in the tax subsidies for those schemes.
It is not good enough for the Government to try to subcontract their responsibilities to the Grcenbury committee. Important though that body is, and important though it is that the views of the CBI are taken into account, it cannot stand in for the Government. Paul Foot, writing in The Guardian, provided an amusing insight—although I do not always agree with him politically. Musing on what might have happened if Labour had been in government, he attempted to draw a parallel:
Imagine, for instance, that the trade union leaders, in a sudden rush of enthusiasm, pay themselves enormous wage increases. Imagine that Bill Morris or John Edmonds tripled their salaries. Imagine the sustained howl of protest in the newspapers.
Investigative journalists Would suddenly flourish at the Daily Mail. The union leaders would be pursued by persistent hacks who would describe in detail every morsel of food they consumed at La Gavroche"—
whatever that is—
and every gold tap in their country mansions.
Imagine, then, the Government being panicked into a response. Imagine the Lord Privy Seal. John Prescott, announcing that his government had decided to suspend all further action on the matter until a committee of trade unionists, previously set up by the TUC, made their recommendations. Imagine. What's more, that the TUC committee was headed by Bill Morris and John Edmonds.
Can you conjure up the Daily Mail headline: BLAIR'S BACK-SCRATCHING BUDDIES. A portentous leader in the Daily Telegraph would condemn the Government for insulting Parliament. 'What has become a matter of urgent public interest—a matter which threatens the very integrity of our public life—is to he dealt with by a cabal led by the very brothers who stand accused of enriching themselves beyond the dreams of avarice.
Strangely, there are few such headlines or leaders in the Mail or the Telegraph about the Greenbury committee",
which, Mr. Foot suggests, comprises
a clutch of millionaires appointed by the Confederation of British Industry to investigate the scandal of, er, millionaires paying themselves grotesque salaries and share options.
It is a humorous piece, but does it not underline the Government's hypocrisy? This is an issue of vital public interest; there is outrage up and down the land about what the Government are allowing to happen. The Government, however, are happy to propose simply subcontracting their responsibilities to a CBI committee some of whose members are beneficiaries of the very schemes that they are charged with investigating. That is unacceptable to the public, and it should be unacceptable to the House.

Mr. Tim Smith: Is the hon. Gentleman suggesting that discretionary share option schemes in the privatised utilities should be treated differently, in tax terms, from such schemes generally? I understood that his policy was to subject them all to income tax. If the former is not his policy, what is the point of producing the report?

Mr. Smith: The point of producing a report that is specially geared to the privatised utilities is twofold. First, those utilities have attracted the most public concern, and have involved the most outrageous abuses. Secondly, there is an interaction, in the fiscal consequences and the consequences for the public purse, between the under-valuation of the assets of the utilities when they were sold and the benefits that the bosses have subsequently been able to extract.
The hon. Gentleman asks whether, in this as in other matters, the law relating to tax should apply equally to schemes in the privatised utilities and those elsewhere. Of course it should: we have made it clear that we consider it sensible and prudent to tax executive share options as income.
It would be interesting to hear from the Financial Secretary what reason the Government could possibly adduce for failing to present the report for which we have called. It cannot he that there are too many schemes to assess. Each scheme has to be formally approved, and there are only 5,000 such schemes covering the privatised utilities and others.
In the case of the privatised utilities, there are 12 regional electricity companies, 10 water companies, two major power generators, one gas company and one telecommunications company. Such a report should not be beyond the Government's resources in the time between now and the Budget. I am grateful to the hon. Member for Wirral, South (Mr. Porter), who nods agreement.

Mr. Barry Porter: indicated dissent.

Ms Primarolo: The hon. Gentleman is nodding off.

Mr. Smith: I assure my hon. Friend that he is not; he is listening attentively, and is vigorously agreeing.

Mr. Porter: Will the hon. Gentleman give way?

Mr. Smith: I will not give way, because the hon. Gentleman will have an opportunity to make his views clear in the debate.
Our suggestion is reasonable and feasible, and the Government can have no argument for not accepting the new clause, which is in the public interest. The regulators of the privatised utilities might also find such a report helpful.
Professor Littlechild of Oftel agreed prices with the regional electricity companies, and was subsequently surprised when Northern Electric found an additional £560 million to defend itself against the bid from Trafalgar House. That shows that the resources were not quite what he expected. Mr. Byatt showed equal surprise when North West Water found an additional £35 million to split between customers and shareholders.
Against that backdrop, it is sensible and in the public interest, and that of taxpayers and the public purse, to have precisely such a report and information as an essential guide to enlightened policy.

Mr. Barry Legg: I am surprised that the hon. Gentleman wants to have the regulator involved, or thinks that the regulator will be interested. Share options involve the issue of shares to employees and directors, and have nothing to do with the pricing of gas or any other commodity. The issue is approved in general meeting, when shareholders decide that they are happy to see a dilution of their holding in the best interests of the employees and directors of the company and its good management.

Mr. Smith: The hon. Gentleman came into the Chamber so recently that he seemed to be out of breath during his intervention. The schemes have not been approved by shareholders: that is precisely the point of one of the main reforms for which we are calling. We say that shareholders should have the opportunity properly to regulate these schemes.

Mr. Legg: Share option schemes have to he approved by the shareholders in general meeting, and that happens in every company.

Mr. Smith: Does the hon. Gentleman claim that the amounts that have been paid to these top bosses were agreed by the shareholders, and were subjected to proper scrutiny? They were not, and that is precisely why we want the powers and composition of remuneration committees to be strengthened.
The hon. Gentleman asked about the regulator. It is relevant to pull the regulator into the picture precisely because the top bosses of these firms should not be able to benefit to such an outrageous extent. That benefit is unrelated to their personal performance, or, in many cases, to the performance of the companies of which they are directors.
As everybody knows, the benefit derives primarily from what happens more generally in the market, and that is precisely what the public find so objectionable about these handouts. They also object to their scale, and to the fact that they arc unrelated to performance. They also find it objectionable that a few individuals get a benefit which is not available to the overwhelming majority of our


people. No matter how hard they work, or how much they contribute to their companies, most people would never receive such benefits in a million years.

Mr. Legg: rose—

Mr. Smith: I have given way twice to the hon. Gentleman. I shall allow him to catch his breath, and perhaps give way to him again before I finish.
It is in the interests of the public and of customers and taxpayers that the report for which the new clause calls should be produced. A Government refusal to accept it would be consistent with the way in which they have mismanaged fiscal policy generally in this area and elsewhere. For example, the cost of profit-related pay went up from £25 million in 1990–91 to £500 million in 1994–95. It has become one of the largest reliefs.
When my hon. Friend the Member for Edinburgh, Central (Mr. Darling) inquired of the Chancellor of the Exchequer about evidence of the effects of such schemes on companies which operate them and on the economy, he was told:
Studies on profit-sharing schemes generally suggest that they are associated with increased employee involvement and increases in productivity."—[Official Report, 22 March 1995; Vol. 257, c. 241.]
The Government should be less vacuous and more specific than that. What studies are they talking about, and what are the changes in productivity? In opening up what has become a bonanza for the privatised utilities and the bosses, the Government must justify themselves and their record to the electorate a good deal better than that.
The Government could make a start by accepting our new clause. If they refuse to accept it, and our arguments on behalf of the overwhelming majority of the public, it will be further confirmation of their hypocrisy. They would never allow any fully public service to be so profligate in the management of finances as they are in respect of these executive share option schemes and their tax subsidies. They will stand guilty yet again of incompetence, because any enterprise, whether publicly or privately owned, could not prosper if it operated in the way in which the Government operate these schemes. Moreover, they will stand guilty of failing to look after the interests of taxpayers as a whole, because it is they who subsidise the few who benefit from the schemes.
It is high time that the country had a Government who properly looked after the interests of the many, instead of allowing the few to feather their nests. That is what the privatised utility bosses are doing under the schemes which the Government seem so ready to tolerate, and which they have done so much to encourage. Our new clause makes prudent sense for the public and the taxpayer.

Mr. Barry Porter: I listened with great interest to the hon. Member for Oxford, East (Mr. Smith). I am sorry that he spoiled his case by using emotive words such as "bosses", and by deploying the envy argument. That is a green argument, not in the environmental sense but in the sense of envy and jealousy. If he had reduced his rhetoric, I might have agreed with him a hit more.
I shall not vote for the new clause, or abstain. It is not merely the forces of envy and jealousy that have reservations about what has happened in quasi-monopolistic privatised industries, because many people believe in rewards for endeavour. I am not arguing that the managers and chief executives of the privatised

utilities are being overpaid; I do not know how we can judge that. It must be a matter for the shareholders, which is what the Government have been arguing.
However, I hope that my right hon. Friend the Financial Secretary will outline the framework of what the Government intend to do about the problem. I agree with the hon. Member for Oxford, East that, while the Greenbury committee is of serious importance, the matter cannot be left until we get its report.
I am sure that Ministers are exercising their little grey cells in that direction. I hope that we will get some specific indication, rather than a broad generalisation, of what the Government intend to do, my right hon. Friend the Prime Minister having accepted in principle that something needs to be done. I await with interest the Financial Secretary's reply.

Mr. David Winnick: It will be interesting to see the Financial Secretary's reaction to the debate. As my hon. Friend the Member for Oxford, East (Mr. Smith) said, it is very much a test of how concerned the Government really are about the share option scandal, and the outrage felt about it.
Through no fault of my own, I hope, I have spent more time outside the House than inside it during the past two months. Therefore, I can tell the Financial Secretary that we are not exaggerating the sense of outrage felt by so many people throughout the country—by no means only Labour voters—that so much can accrue to so few people who, at the end of the day, are simply doing precisely the work they did previously, when the utilities were in public ownership.
Not only have the salaries of those who run the privatised industries increased substantially, but they have been given various perks—altogether almost as though they had won the top prizes in the national lottery a number of times over. In addition, if they were to realise the share options, a great deal more money would accrue to them, which would cause further concern throughout the country.
I have been studying some of the figures. Based on share prices at 30 March, the value of shares held under option by the directors of the water, electricity and gas companies totals no less than £80 million. The profit that could be made were those shares to be sold would be about £27 million, to be shared by only a few individuals.
The hon. Member for Wirral, South (Mr. Porter) made a fair-minded speech, except that he took my hon. Friend the Member for Oxford, East to task for using what he called emotive language about bosses. But they are bosses; they run the industries. Almost without exception, those same people were running the industries when they were in public ownership and they were receiving a reasonable salary; but since privatisation, they have received salary increases far, far in excess in percentage terms of anything our constituents could ever get. They have also had various perks, and now they have share options.
The Government's only response is to say that, although they do not really like it, there is nothing they can do about it. As the hon. Member for Milton Keynes, South-West (Mr. Legg) said, they think that it is a matter for the shareholders. I can tell the Government that what


has been happening with these directors smells as much among the electorate as what happened with Westminster council—

Mr. Deputy Speaker: Order. It is nice to see the hon. Gentleman in his place once again, but I must tell him that we are not debating Westminster council this afternoon.

Mr. Winnick: I was merely using that council as an illustration, Mr. Deputy Speaker.
I cannot help but compare the Government's attitude to bosses' salaries with their attitude towards the shabby way in which nurses and others in the national health service have been treated. However, I will not go any further down that road, Mr. Deputy Speaker, as I know that you would rule me out of order.
5.45 pm
Tonight, the Government have a test on their hands. If they are truly concerned about what has been happening and about the sense of outrage felt throughout the country, they will accept Labour's very reasonable new clause. After all, it is not in such terms that the Government could say that it ran wholly against their philosophy; it would not return the industries to public ownership. It is a reasonably phrased new clause, which is concerned with public revenues.
Time and again, the Government say how concerned they are about public revenues, but when it comes to the fat cats, the bosses—I make no apology for using what Conservative Members may consider emotive language—and the need to deal with the scandal of the past few years, the test will be whether the Financial Secretary is prepared to respond positively to the new clause.
If the Government want to know why they are suffering from such unpopularity throughout the country—more so, perhaps, than any other Government since the war—I can tell them that it is because people believe that they deal differently with the fat cats than they do with the rest of the population. Ordinary employees know that they are likely to get a raw deal from the Government, but they do not believe that the Government will act in the same way towards the fat cats.
Although Conservative Members may not like what I am saying, and may feel that I am not presenting the picture fairly, the truth is that a great deal of the Government's unpopularity and the way in which, increasingly, they are held in contempt, is a result of the very strong belief that the Government do not give a damn about the ordinary people, be they the nurses or any other group who earn an ordinary living. The Government could not care less about what sort of wage increases—

Mr. Deputy Speaker: Order. I know that the hon. Gentleman has been absent through illness, and I realise that now that he has returned, he wishes to cover a whole spectrum of issues, but he must not do so under this new clause. His remarks must relate to share option schemes.

Mr. Winnick: I appreciate your guidance, Mr. Deputy Speaker. I was concluding my remarks, and trying to show why people throughout the country feel very strongly that the Government treat ordinary people—even when they lose their jobs—very differently from the way that they treat the fat cats.
If the Government want to show a genuine concern about the scandal surrounding the chief executives of the privatised industries, they will accept the new clause. However, Labour Members know full well that they have no intention of doing anything of the sort. That proves the point that we have made repeatedly—that the fat cats can do what they like because it is they whom the Government think should be rewarded in every possible way.

Mr. Tim Smith: It is good to see the hon. Member for Walsall, North (Mr. Winnick) back in his place. There is no doubt that there is considerable public disquiet about the matters that he raised.
I have some sympathy with the proposal of the hon. Member for Oxford, East (Mr. Smith) that the Treasury should produce a report. Reports are useful, and they provide information on which decisions can be made. He was kind enough to support my proposal that the Inland Revenue should produce a report, which the Committee considering the Bill agreed to.

Mr. Andrew Smith: I congratulate the hon. Gentleman again on his initiative in relation to the tax simplification clause. Does he agree that it would only be right for that clause to be known as the Smith clause?

Mr. Smith: Certainly. As the hon. Gentleman was good enough to support it, it should undoubtedly be known as the Smith clause.
In an intervention, the hon. Gentleman told me that he did not think that the tax system should distinguish between private utilities and companies in general. I am doubtful, therefore, about the value of producing the report. The question is how we should respond to the public disquiet that we all accept exists. Should we do so through the tax system, through the regulator, or by trying to persuade shareholders to do something about the matter?
I think that Paul Foot drew an interesting parallel with trade unions in an article in The Guardian. Clearly, accountability works much better in trade unions. It is obvious that, if trade union officials tried to abuse their position in the way that it has been suggested chairmen and chief executives of some companies have, union members would not stand for it. They would take action to deal with that. A direct relationship exists there between union members, the union council, and the general secretary.
When it comes to companies, however, clearly something is wrong with the system. We talk about large shareholders and institutional shareholders, but behind those shareholders stand the ordinary people who are so concerned about what is going on.

Mr. Stephen Timms: Does the difficulty not lie in the fact that customers of those companies are the victims of what is happening? Shareholders may, in a narrow sense, think that they benefit from that activity, hut surely it is the customers who are suffering. They are the ones who need to he given a voice.

Mr. Smith: I do not accept that customers are suffering. The amounts involving customers are trivial. My right hon. Friend the President of the Board of Trade recently gave some figures about British Gas. They


showed that, if the director of British Gas were paid nothing, the annual benefit to each customer would be trivial. I do not think that it is a matter for customers.
The other important point is that, since privatisation, both the customers and shareholders of those companies have benefited. If one takes British Gas, in the past nine years, the price of gas has fallen by 20 per cent. in real terms. At the same time, the business's profitability has increased substantially, because new pressure has been placed on management to become more efficient and to drive costs down. As profitability has risen, so has the share price.

Mr. Timms: May I give the hon. Gentleman the example of Thames Water? Last week, it was revealed that it had agreed with the regulator that it would invest £2.1 billion, and that it would set its prices according to that agreement. Now it has emerged that, in the next five years, it will invest only £1.75 billion; therefore, it is investing significantly less than had been agreed. Undoubtedly that is boosting the share price and share options, but it is leading to inadequate investment in Thames Water's infrastructure in its region. That is of particular concern to my constituents.
Thames Water is undertaking major sewer renovation work in my constituency in an extremely penny-pinching way, which is causing enormous difficulties for my constituents. The arrangement whereby Thames Water's objective boosts its share price, and therefore share options, is causing the problems.

Mr. Smith: I am not familiar with the details of Thames Water. Some of my constituents are customers, so I would be concerned about that matter. The normal effect, however, of reducing investment is to reduce profitability. Last week, North West Water announced that extra dividends would be paid to shareholders, and that there would be extra investment for customers, and a reduction in customers' bills.

Dame Elaine Kellett-Bowman: Hear, hear.

Mr. SmithM: I am sure that my hon. Friend is pleased about that, because the customers will benefit along with the shareholders. That has been the double benefit of privatisation.
I still think that the hest way to tackle share option schemes is to try to persuade shareholders to do something about them. The Greenbury committee has been criticised because it consists, or so it is alleged, of the very people who are abusing the system, but they are the people best placed to deal with the matter.
Behind institutional shareholders stand the millions of people who put money into pension schemes. Every hon. Member has an interest, because our pension scheme has no doubt been invested in British Gas, and in water, electricity and other companies. If we consider the pension scheme's accounts, we shall find that it is no different from any other pension scheme.
Pension scheme members and people who invest in life policies stand behind institutional shareholders. If those people were able to have more of a say in the matter, something would be done about it.

Ms Margaret Hodge: It is interesting that the hon. Gentleman thinks that shareholders should exert greater pressure. The Government are a substantial

shareholder in both PowerGen and National Power. Does he therefore agree that the Government have failed in their duty to protect the public's interest by not exerting their shareholder powers in those companies?

Mr. Smith: The hon. Lady is a few weeks out of date, as the Government sold their remaining shareholding in those companies a few weeks ago. The Government are, of course, a unique shareholder. I am not in favour of the Government using their shareholding to achieve those objectives. The Government used to interfere in nationalised industries for all sorts of nefarious reasons that had nothing to do with providing a decent service. It is down to shareholders. After all, directors will benefit from discretionary share option schemes only if the share price rises; otherwise, they will not.
Since privatisation, electricity businesses have been far more successful in driving down costs than anyone—including the Treasury and the City—had anticipated. Nobody had understood just how inefficient the electricity companies were when they were owned by the Government. Generally, nationalised industries are inefficient. Costs have been driven down substantially. As a result, profits have risen rapidly. As a consequence, the share price has risen rapidly.
Perhaps the regulator should have taken a tougher stance; that is another issue. Management has been successful in producing more efficient companies. The share price has risen. Why should not the directors of companies benefit in those circumstances? That is what a share option scheme is about.
As I said in Committee, it is not widely appreciated that retained profits, and not money borrowed from banks or raised on the stock exchange, arc the main source of investment for companies. Those profits are important. The profitability of industry is extremely important. In any company, the principal people who can determine the profitability level are, of course, the senior management—the directors. That is why it is right that a special discretionary share options scheme should be widely available. It encourages efficiency, more investment and more profitability.
Particular cases of abuse in privatised utilities have been mentioned. We must move as quickly as we can away from their monopolistic position by injecting more competition into the system. That is what the Government are doing.

Mr. Gerry Sutcliffe: Is not the whole point that we are talking about privatised monopolies? That is the base from which directors work. They do not do anything over and above what other shareholders do. Those shareholders take risks, but no risk was involved for those directors. They work in privatised monopolies. Surely the Government should have done something at an early stage.

Mr. Smith: It is true that those companies have not been subject to the same competition as, for example, major retailers, which face intense competition, but they have been subjected at least to the pressures that come from having shareholders. As a consequence, they have become much more efficient. They have driven their costs down. It is right that management should be rewarded for that.
I agree, however, that we need to go further and to remove, as far as we can, those companies' monopolistic status. That is what we are doing with the Gas Bill, which introduces competition at all levels of the gas supply industry. We shall have the same provision for the electricity industry. Such competition will not be introduced in the water industry, which is a natural monopoly, where it is much more difficult to inject competition. I accept that, but it is important to introduce competition into the system so that management are subject to the same pressures as people in other businesses.

Mr. Timms: How is it possible to introduce competition into the water industry? In reality, cannot costs be cut in that industry only by reducing the level of service to the customers?

Mr. Smith: I know that it is difficult to introduce competition into the water industry, because I made an inquiry after we passed the Competition and Service (Utilities) Act 1992, which introduces an element of competition into the water industry. I am a customer of the Three Valleys water company, and Thames Water is half a mile down the road, so I wrote to Thames Water to see whether I could change suppliers. It told me that, if I paid £10,000 to have the main extended to my house, I would be welcome to buy its water.
The hon. Gentleman is right to say that competition in the supply of water is more difficult to organise, but it can be done on the same basis as it is being done for gas. The pipes could be kept in public ownership, and different suppliers could supply the water. It is possible, but it is much more difficult.
As far as possible, we need more competition to put the utilities on the same basis as other businesses. These are the right pressures to place on those companies, rather than trying to tackle the problem through the tax system. It is tempting to try to use the tax system to achieve different, social objectives but I do not believe that we should do so in this instance.

6 pm

Mrs. Helen Liddell: I am sorry that the hon. Member for Wirral, South (Mr. Porter) is no longer in his place because he mentioned greed and envy. I find it interesting that every time we discuss this matter, Conservative Members use those words. That says rather a lot about them and their view of remuneration and not quite so much about Opposition Members.
The hon. Member for Wirral, South failed to recall that one person who has prosecuted the case for a more equitable means of controlling share options is Mr. Alistair Ross Goobey, chief executive of POSTEL, who is not known for his radical views or support of Labour Members as he was previously a special adviser to a Chancellor of the Exchequer.
Indeed, I am interested in several points made by Conservative Members about share options because they merely highlight the point that the Member for Wirral, South made: we are debating a divided society, a them-and-us society, and most people in the advanced world who are concerned about the operation of industry in the public and private sectors are very much aware of the need to reduce the them-and-us divide.
It is extremely difficult to convince people, in this week of all weeks, when they are about to have the 20th increase in taxation since the Government were elected, that those who control the privatised utilities should be treated more favourably by the tax system than those who actually work in those industries and the rest of us, who will face increased taxation from 6 April.
It beggars belief that Conservative Members can be so naive as not to see the inequities in the system. New clause 1, which I support, gives us a minor opportunity to consider in some detail the difficulties that have arisen as a result of discretionary share options in privatised utilities.
A debate is being held in this country about the effectiveness of share options. The same debate is taking place in the United States, where there is concern in the private sector about the use of stock options to allow remuneration of senior managers in a way that is not directly affected by the performance of the industries in which they are employed.
The debate is meaningful because there is considerable evidence to show that granting share options does not so much affect the performance of an industry as the performance of its share price. The share price and the performance of an industry are in many cases not directly related. Indeed, when the time comes for the publication of annual accounts, it is possible through creative accounting to make the operation of a business look much better than it has in fact been.
I would be much more convinced of the rectitude of those who argue for share option schemes if they were also prepared to build disincentives into the remuneration structure. When a company's share price increases, senior executives benefit. If there is a reduction in the share price or performance of that company, why should not those who run the company be disadvantaged? We should be in a position where true targets are set for businesses in place of the rather bizarre structure of share options that we have at the moment.
It is only in this country, the United States and France that such tax-attractive schemes tend to be introduced for senior executives. Most other countries recognise the true value of building a structure where employers and employees share together in the destiny of a company and are motivated by the destiny of that company, whether it be in the public or private sector.

Mr. Legg: Is the hon. Lady aware that 36,000 employees of British Gas benefit from share-related incentive schemes of some sort?

Mrs. Liddell: I am sure that the hon. Gentleman is aware that there are different kinds of share option schemes. The 36,000 ordinary employees of British Gas usually benefit from savings-related share schemes and tend to be less able to have an impact on the share price than the senior executives who can directly affect it.
The hon. Member for Beaconsfield (Mr. Smith) mentioned the impact that institutional shareholders can have on controlling the excesses of senior management. That was a preposterous suggestion. Part of the argument of Mr. Ross Goobey has been that institutional shareholders are limited in their ability to control the senior management of companies. There is an informal network that operates among institutional shareholders. They are the same people, usually male and usually from


the same schools, and they are recycled time and again. They turn up at the same annual meetings, eat the same prawn cocktails and have the same impact on the share remuneration schemes because they benefit from share remuneration schemes.
I hope that the Financial Secretary will make it clear how it is equitable that the taxation system that applies to the sale of share options should be different from that which applies to other aspects of earned income. That is extremely difficult to explain to members of the public who, like my constituents, see their service from British Gas reduced by the closure of gas showrooms. There are fears about what will happen to assistance for disabled people from the gas industry.
It is difficult to explain to people why senior executives in the gas industry can choose when to activate their options and can phase in the activation of their options over time to take advantage of allowances that are available through capital gains tax. They can even pass on those share options to their spouse to allow their wife or husband to benefit from those share options and from the capital allowances that are available to them.
That is manifestly unfair and people are not that gullible. They see that the rich are getting richer on the backs of the rest of us. The privatised utilities have been seen as basic to the structure of our country. They mainly operate as monopolies or quasi-monopolies. Those who are or have been in a position to benefit from the first tranches of share options—and they were granted options at a rate that was greatly deflated and had been massively underestimated—can now become millionaires, in some cases millionaires many times over.
The new clause seeks only a rational report and analysis of what is happening and of the impact on the Exchequer of the proposals so that people can make genuine judgments. It was not so very long ago that we were told by the Prime Minister of his commitment to ending inequality. The most fundamental inequality is this system of share options, which is unfair and inefficient. No one can put hand on heart and prove that the existence of share options dramatically improves, or in any way affects, the performance of a company or of an executive. Research published at the weekend suggested that the schemes have a limited impact on improving company performance.
The Financial Secretary has the opportunity to instigate an examination into the operation of such schemes and their impact on the economy and to consider the structure of the tax system in such a way as to get rid of the inequalities and convince the people that the Government are not prepared just to govern in the interests of the few at the expense of the many.

Mr. George Stevenson: I think that I am right in saying that the Standing Committee on the Finance Bill had 25 sittings. Obviously, it discussed many issues, but I suspect that this is the one that the public will consider very carefully. It is difficult to identify many of the other issues that we discussed in our number-crunching sittings in Committee as being in the forefront of public consciousness.
The public will carefully watch the Government's reaction to the new clause, which is not a radical attempt to bring down the Government, much as we would like to do so, but merely asks for a report back to the House. Why do we want such a report? We are talking about the

principle of discretionary approved share option schemes, which are of massive public concern, as has been accepted by hon. Members on both sides of the House.
We are also considering the way in which such schemes are taxed. Approved schemes are taxed not as earned income but as a capital gain—I would argue about the concept of earned income, but perhaps that is an argument for another day. As far as I and many members of the public can see, the share option schemes have been established by a relatively small cabal and have enabled executives to freeload on privatized monopolies—Conservative Members have accepted that they are such monopolies—and to gain tremendously.
The speech of the hon. Member for Beaconsfield (Mr. Smith), who made a considerable contribution to the Standing Committee—some of it was useful and no doubt he would say the same for Opposition Members—was striking, but I gained the feeling that, the longer that he went on, the more desperate he became. Having created the conditions in which abuses—the word that the hon. Member for Beaconsfield used—can take place, the Government are turning their faces steadfastly against any reports to the House on those abuses, which is interesting. The public will be rightly outraged if they perceive that executive share options are being used to line the pockets of people who have done nothing to earn such largesse, while the Government refuse the House the opportunity to study in more detail the effect that the schemes are having on revenue. The new clause is the minimum that the public can expect as regards knowing exactly what is going on.
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I listened carefully to the hon. Member for Beaconsfield, and the other thing that shocked me about his speech was that he tried to argue that such executive share option schemes are necessary to encourage executive directors to work hard. It is interesting that Mr. Cedric Brown has to have nearly £700,000 worth of share options to work harder, but people in gas showrooms have to have a 3 per cent. pay cut to make them do so. It is a nice philosophical question, with which the Government singularly failed to deal throughout our debates in Committee.
The Government have also failed to recognise the chronic sense of injustice and unfairness that is felt throughout the country about the way in which executive share option schemes are operating. For some reason that is beyond me, the Government simply refuse to recognise it and the new clause is extremely important in that regard.
Many of us will be watching with great interest. In reply to an intervention by my hon. Friend the Member for Barking (Ms Hodge), the hon. Member for Beaconsfield said that the Government had disposed of their 40 per cent. shareholding in PowerGen and National Power. Another task is coming up, however, and it will be a test of the Government's approach to the issue. What will be their attitude to the give-away of the national grid? It was valued at £1 billion and handed over as the most massive Christmas present in history to the regional electricity companies, which are going to give it away, throw it away, privatise it, or sell it off for £4 billion—and that is the conservative estimate. What have the executive directors of the regional electricity companies done to warrant that massive unearned profit? They have done


absolutely nothing. We shall watch extremely carefully how the Government approach the latest instalment of the largesse represented by the executive share option schemes.
Why should there be a report to the House? I mentioned the fact that the public are extremely concerned about the issue. The House should reflect that concern. Even at this late stage, I hope that the Government will recognise that it exists and that this is the place to deal with it.
It appears that the shares of the companies involved have gone up not only because they were undervalued in the first place but because many hundreds of thousands of jobs have been lost in the past few years. That is bad enough, but the hon. Member for Wirral, South (Mr. Porter) spoke of envy and jealousy. He should speak to my constituents, and to those of every other hon. Member who have lost their jobs as a result of those very same executive directors and ask them what they feel about envy, jealousy and the feel-good factor. He should ask them how they feel about the fact that the privatised utilities seem to be employing a strategy of maintaining or increasing their share value at whatever cost not in the interests of the country or of investment but because they are constantly looking over their shoulders for the next hostile takeover hid. Those issues are not peripheral; they arc fundamental and are rightly reflected in the public's concern.
The least that the House can do is support the new clause, which proposes that the Government should report to Parliament so that extremely important issues can be examined in more detail. If Conservative Members vote in the Lobby to defeat the new clause, as we expect they will, I do not believe for a moment that the great British public will understand their action.

Ms Hodge: I congratulate my hon. Friend the Member for Oxford, East (Mr. Smith) on his speech, which was excellent and reasonable. It is difficult to understand how anyone could not be moved by such reason. This would be a sad day if Conservative Members were moved by party interests rather than national interests in rejecting this small move to bring to public account an issue that has caused such outrage in the community at large.
As my hon. Friend the Member for Monklands, East (Mrs. Liddell) said, the Prime Minister is on record as saying at Prime Minister's questions that he believes that it is the Government's responsibility to reduce inequality. The new clause strikes at the heart of that obligation.
The hon. Member for Beaconsfield (Mr. Smith) reiterated what many other Tory Members have said—that everybody has benefited from the efficiencies gained from privatising public utilities. Were there efficiencies to be gained, there is no reason why they could not have been gained while retaining those utilities in the public sector. If they were not attained, it is because of the Government's inefficiency and it reflects their mismanagement of those important sectors of the economy. It has nothing to do with privatising the public utilities.
The Labour party wants an economy that is run in the public interest. Two essential features of such an economy are fairness and openness, both of which are severely undermined by the scandal of discretionary share option schemes in the privatised utilities, particularly when

low-paid workers are being offered paltry wage increases. We have had considerable interest recently in demonstrations by health service workers about the 1 per cent. pay increase that has been guaranteed nationally. Everybody's sense of social justice—

Mr. Deputy Speaker: Order. The hon. Lady must address the majority of her speech to discretionary share option schemes. Other allusions are acceptable, but so far the minority of her comments have related to the new clause.

Ms Hodge: I understand what you say, Mr. Deputy Speaker. I was trying to juxtapose the two areas of public interest.
It adds insult to injury when people cannot even hold those responsible for such huge gains made through discretionary share option schemes to account for their actions. That is the purpose of the new clause.
We have already witnessed a massive unfair pay explosion among the bosses of the private monopolies. For example, last year the board of National Power awarded itself a 25 per cent. increase in remuneration, which was in stark contrast to the 4 per cent. average increase for its employees. The gap between the pay of people in the boardroom and people on the shop floor is even more stark. A comparison of last year and the year before privatisation shows that the total remuneration package for the highest-paid directors of the privatised utilities rose by an average of 321 per cent. In three of the privatised utilities, the directors gave themselves rises of more than 400 per cent. The boss of North West Water heads what I consider to he the roll of shame with an increase of 619 per cent.
Share option schemes are another side of the same coin. Some £500 million was paid out to just nine directors of PowerGen and National Power last year alone. That is an average of more than £500,000 each, which would be enough to pay for an extra 30 staff in a hospital or more than 100 full-time places in a good nursery school. Have we got our national priorities right? In addition, a further £18 million is yet to be cashed in by the very same directors and chief executives. Last year alone, the chief executives of PowerGen and National Power earned more than £l million each in pay and share options, and they are set to make a further £1 million each in the coming year. It is a scandal of momentous proportions.
The greatest scandal of all is National Grid, as this year alone its chairman could make an astounding £2 million, almost £1.8 million of which is immediate share option profits. That is in a company that is yet to trade properly. With such handouts, the Government are giving private ownership a bad name.
Those are just a selection of the abuses being committed by the private utilities. We object not to rewards for excellence, entrepreneurship or enterprise but to the fact that the bosses of those private monopolies vote themselves handsome packages whereas their employees are forced to tighten their belts and consumers must make ends meet. More often than not, they are not new people who have been attracted into those industries since privatisation but the same old faces who arc making a quick buck because there is nobody around to stop them doing so. That is the unacceptable face of capitalism.
The new clause simply seeks to make this area a little more transparent and open it up to public scrutiny. Parliament has a duty to monitor the operation of those


share option schemes. Furthermore, I cannot see the argument against taxing share options as income. People have a right to know what is happening, how much a small number of very well-paid people are earning and what potential revenues are being lost to the public purse by the Government's refusal to tax share options as income. The new clause simply provides a new opportunity to put that information in the public domain.
The Government have claimed that those issues are the business of shareholders, and the hon. Member for Beaconsfield seemed to support that view. In a private monopoly that serves a vital public interest, such a contention is wrong. The Government have a responsibility to consider the interests of the general public, consumers and the environment. Shareholders could have greater opportunities to hold their utility bosses to account by electing a remuneration committee, to include people who are not on the board of directors. It could be told the pay and perks of individual board members and could vote on their remuneration.
The Government have a duty to act to safeguard the interests of taxpayers and consumers. Monopoly industries simply cannot be left to their own devices in the hope that, at some time in the future, some sort of competition will emerge.
Last week, we were lobbied by users and workers of the health and education services. The contrast between their situation and that of the people whom we are discussing tonight could not be more stark. It is a classic case of private greed against public need; of the interests of the many against the privileges of the few.
There is widespread public concern that the House and the Government have got their priorities badly wrong. The new clause provides the means of starting to undo that damage. We should start to hold the privatised utilities to public account. New clause 1 provides the foundation for doing so and I commend it to the House.

Mr. Clive Betts: I wonder whether Conservative Members will dare to venture out in the next few weeks to canvass during the local government elections. I wonder whether that possibility offers them any great opportunities or is a pleasant prospect to them.
The Financial Secretary to the Treasury might like to come to my constituency and knock on one or two doors. Perhaps he could introduce himself with the words, "I am here from the Government. I have come to help you." I am sure that one of the instinctive responses from the people he spoke to would be that they consider that the Government are extremely unfair. I am sure that the right hon. Gentleman would be offered many anecdotes to back up that instinct, but what would come out most strongly is how unfair people consider share option schemes and other pay excesses in the privatised utilities. People feel incensed about that. They feel that it is wrong and that the Government should do something about it.
People are angry because their basic sense of reasonableness has been offended by such excessive pay increases and share option schemes. They are angry that directors and the like are receiving mega sums of money, which those people could not possibly dream of, unless, perhaps, they won the lottery. People are also angry that

the Government either do not want to, or cannot, do anything about those excesses—either way, people are angry.
People are aggrieved not only because their basic sense of fairness has been offended but because those excesses carry a basic hallmark of the Government and their policies—their inability to act. Week after week, the Prime Minister came to the Chamber and said that such share options were not the Government's responsibility. He said that the Government had merely been responsible for privatising the utilities and introducing the regulations that govern them. He claimed, however, that the Government were not responsible for share option schemes and other pay excesses. Then, suddenly, one Prime Minister's Question Time, in one sentence, the right hon. Gentleman sold a dummy that sent all his hon. Friends the wrong way, when he said that he was concerned about the issue. He had claimed that it was nothing to do with the Government and all to do with the utility companies and their directors, but, suddenly, he accepted that the issue caused him concern. He did not promise any action, however, but said that the Government would await the Greenbury report. That is unacceptable.
The Greenbury committee, however well intentioned, is equivalent to the captains of industry reporting on themselves. It is no substitute for the Government taking a view and proposing some measures to deal with the matter. It is almost as though a new word has entered the English language. In future, "to Greenbury" may mean to delegate an issue which one feels uncomfortable about and about which one has no real idea what to do, in the basic hope that it will go away.
That seems to be the Government's attitude. They feel uncomfortable about share options, but they have no idea what to do about them. They hope that if they refer the problem to some committee that will report some months later, the steam will go out of the issue and it will go away. In that way, they hope that they will not have to make any difficult choices.
That is not the public's reaction to share options. They are angry at the unfairness, because directors vote for such schemes for themselves. Those directors decide how much money they should award themselves. Most people do not feel that that is right, not least because the Government have created the circumstances by which directors can make such decisions. The public also believe that directors are voting themselves pay increases through share option schemes to reward themselves for doing precisely the same job as they did before their companies were privatised. That may not be true of every utility, but it is true of the water industry, whose chairmen and chief executives are doing precisely the same job, with no more competition than that to which they were subject before privatisation. Those individuals have voted pay awards for themselves.
Share option schemes do not represent an attempt to involve executives in the ownership of a company. They are not the means by which, in the long term, executives will receive genuine rewards for the way in which they have managed their company and because that company has become more efficient. Those share options are one-way tickets, because it is not possible to make a loss. If the share price goes down, the executives suffer no loss; they simply fail to make a windfall gain. That offends people, including many in industry who may have made


arrangements in the past whereby they took a stake in a company as managers and directors. They lost as well as gained when share prices went down and up. Those individuals sat on a company board for a number of years and were genuinely responsible for the management and running of their company as part-owners of it. They benefited or lost accordingly. Share option schemes do not operate in the same way. They are one-way bets, which result in winners only and no losers. That offends people greatly.
I am sorry that the hon. Member for Beaconsfield (Mr. Smith) is not in his place, but today he repeated the argument he made in Committee about retained profits. I accept that they are an important means of investment, but as the Opposition made clear in Committee, the problem with this country is the low level of retained profits. Share option schemes are an incentive because, although the beneficiaries may not keep them for a long time—usually they sell them quickly to make a profit—executives are keen to pay out dividends to boost share prices in the short term. In that way, those executives make their gains by selling the shares that are part of their share option scheme packages. That is what they are all about. They are not an incentive to retain profits for investment.
Reasonable people are offended when they hear about cases like that of one of my constituents, whom I saw today. Mrs. Wells, from Darnall in my constituency, lives beside a brook. In the past few months, the river served by that brook has gone into full flow several times due to heavy rainfall, and when that happens, the brook becomes an open sewer. As it flows over my constituent's garden wall, it carries with it raw sewage, which then flows past my constituent's home. That pollutes the river, creates an awful smell and attracts rats, which have even entered her home.
My constituent has asked Yorkshire Water to invest sufficient money in its next five-year capital programme to deal with the problem, but it has said that it cannot afford to do so. It has told her that it does not have sufficient money from its retained profits to afford that. In the next five years, however, what Yorkshire Water will pay in share option schemes to its directors is more than it would cost it to make a modest investment to deal with the raw sewage that passes the home of someone who lives 50 yd from a major shopping centre. That is unacceptable. It is another reason for people's outrage and why they believe that share option schemes are grievously unfair and action is needed to tackle them.
The Labour party has made a number of basic proposals to deal with the problem, and that the Government could adopt if they were minded to. We have argued for greater disclosure. It is all right for Conservative Members to say that shareholders are told about share option schemes, but why were we treated to the performance of Cedric Brown before the Select Committee on Employment? He had to have his pay package extracted from him as if having teeth drawn without anaesthetic. He did not want to give that information and others have been embarrassed by what he said, because he was too up front. The name of the game has been to vote pay packages through in such a way that companies hope that no one notices what is going on. Nasty questions will thus be avoided. There must be a better system of disclosure.
The Cadbury proposals must be extended, so that separate remuneration committees, made up of those who do not stand to benefit, vote for share option schemes. Basic reasonableness must be introduced into the system. It should be a basic tenet of the operation of such share schemes that the people who benefit from them do not vote for them. Go and ask the public about that. I do not believe that anyone would find one person in a hundred who felt that that proposal was unfair. Why do the Government not do something about that?
Why are not the schemes taxed as income? Conservative Members say that there is only £6,000 of untaxed income. Many people who live in my constituency do not earn £6,000 a year, let alone £6,000 of untaxed income. For many people, £6,000 is a great deal of money. When Conservative Members say that it is only £6,000, they badly misjudge public opinion.
Why should the regulator be worried about share option schemes? We have clearly demonstrated that they are linked to prices, profits and investment. They make up one package, and the Government have to adopt an opinion of the whole. The regulator has been given powers, which we believe need to be extended.
The new clause is fundamentally mild and moderate. As my hon. Friend the Member for Barking (Ms Hodge) said, it is reasonable and moderate. We have not asked for all the things that we have said need to be done. We ask only that a report be made to the House to let the House know precisely what is going on and what is the impact of those schemes; whether, in total, the Exchequer and the British public gain or lose from those schemes.
We have already had a clear demonstration that the Government are incapable of acting on the issue. Are they now also incapable of providing information about it? Or is it not their capacity that is in doubt, but their desire to produce a report on that issue? Are they so embarrassed about it that they want to avoid further debate? If that is the case, people will not judge them kindly for their disgraceful attitude towards the issue. The Government should be prepared to produce a report and let the people know precisely what is going on.

Mr. Sutcliffe: This issue is not about greed, envy or even political advantage, as the hon. Member for Wirral, South (Mr. Porter) suggested. It is about fairness and equity. Every Conservative Member who has spoken has recognised that the problem exists, but none has come up with a solution.
It will be interesting to hear the way in which the Financial Secretary to the Treasury replies to the debate. I hope that he will not push us to one side and tell us to wait for the Greenbury recommendations. I hope that he will tackle the issue because, if the regulator cannot consider the matter, the only organisation that can consider it is the Inland Revenue, via the tax system, and that is where the Minister's responsibility lies.
It is patently unfair that executives of privatised utilities make large sums when they are devoting no more effort to their work than they did when they worked for public utilities that benefited everyone. When those public utilities were privatised, the Government said that they would be privatised for the greater good and that many people would benefit. That was not the case. In that respect, we have witnessed the classic unfairness that has become a trademark of this Government.
The Government recognise the problem. They say that the money does not matter, but those people have benefited to the tune of £150 million. The hon. Member for Milton Keynes, South-West (Mr. Legg) said that 36,000 people in British Gas also have share option schemes. They do, but those share option schemes are usually "buy one, get one free" schemes, in which people have to invest their own money and take the risks. The executives have taken no risks and made no investment.
I hope that the Financial Secretary, who is very eloquent and who has been eloquent in Committee, will give the answer for the Government. It is no good the Prime Minister recognising that there is a problem but not suggesting a solution. Lei us have it. Will the Government tell us what they will do about those abuses, or shall we hear nothing from the Government, as we forecast? That is patently unfair. It is not a party political issue. People throughout the spectrum are upset about those abuses, and it is about time that the Government did something about them.

Mr. Ian Pearson: I extend a warm welcome to my hon. Friend the Member for Walsall, North (Mr. Winnick) and assure him, as a fellow Member of Parliament for the black country, that the anger and disgust felt about discretionary share option schemes among the private utilities is as strong and severe in Dudley, West as it is in Walsall.
Let me say at once that the directors of private utilities have done nothing illegal. All that they have done is to join the club, albeit with gathering haste in some cases. I suppose that it is the modern equivalent of the key to the executive washroom. It is the key to the executive dosh room of cosy remuneration committees, offering sybaritic salary perks to directors for what they should be doing anyway, which is acting in the best interests of their companies.
We have to draw a distinction between legislation pertaining to the privatised utilities and legislation relating to companies that are subject to the full forces of market competition, but what is basically at fault is some very lax legislation as regards Inland Revenue-approved executive share option schemes. Those schemes offer a perk because, rather than income tax, capital gains tax is payable on share options, which can be deferred almost indefinitely. Those schemes also offer an extremely generous treatment whereby share options up to the level of four times inflated salaries can be awarded to directors and senior executives.
Only the few benefit. We have heard talk about 36,000 people in British Gas who benefit from share-linked option schemes. The directors of British Gas who benefit from share-linked option schemes—they obviously have far greater schemes than any of the individual employees—have benefited to the tune of about 50,000 shares. Contrast that with their discretionary share options, whereby they have been awarded 1.3 million shares. That shows the scale of difference between properly organised share incentive schemes and executive share option schemes, which are a one-way bet and a perk to directors.
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One fact that has not been fully discussed in the debate but that has merit is that discretionary share option schemes can provide some benefit to consumers who have

pensions that are invested in those companies, and who therefore benefit from the increase in the share price. That has been mentioned by some Conservative Members.
Hon. Members on both sides of the House must recognise that there is tension between the interests of two groups of people. On one hand, consumers whose pensions may be invested in share option schemes may benefit because directors are given an incentive and are focused on improving share performance. On the other, consumers may suffer from the consequences when certain companies are run in an aggressively short-term profit-maximising way in a deliberate attempt to boost the share price and thereby increase directors' income. That is one of the reasons why a report is very much needed, because there are potential benefits as well as the extreme costs of executive share option schemes of which we are all aware.
It is important to recognise the practical difficulties when Conservative Members speak of the need to enfranchise the people who stand behind shareholders. The shareholders of most of the private utilities are very much the shareholding institutions. I do not know how I, as a personal pension plan holder before I came to the House, could talk to the person who sold me a pension and say, "By the way, can you talk to someone who can talk to someone who can ensure that, at the next annual general meeting, you vote against those discretionary share options?" Similarly, I do not think that the House of Commons Members' pension scheme can exercise any reasonable legitimate influence on those companies at annual general meetings.
The hon. Member for Beaconsfield (Mr. Smith) has a good idea in trying to enfranchise those who stand behind shareholders, but I can envisage no practicable means by which that can be exercised.

Mr. Tim Smith: As an example of what already happens, we already have ethical investment and unit trusts. An individual can choose to invest in one of those trusts because it has, for example, made a policy decision not to invest in tobacco companies, drinks companies or whatever.

Mr. Pearson: I am well aware of ethical investment trusts and I have been pleased to note that their share fund performance has in many instances outperformed those of unit trusts that invest in a broader spectrum of companies without imposing those narrow criteria. I do not think that the hon. Member for Beaconsfield is seriously suggesting that shareholder pressure can operate in a broader sense against executive share option schemes, other than in those limited ethical considerations.
The simple fact is that a report is needed badly to investigate why directors of privatised utilities need executive share options at extremely lucrative levels to do what they should be doing anyway—acting in the best interests of their company—and why, as my hon. Friend the Member for Stoke-on-Trent, South (Mr. Stevenson) said, it can be right and reasonable that a director needs a £700,000 package to make him improve his performance when his staff are expected to accept a 3 per cent. wage cut to encourage them to increase their performance. That cannot be right.

Sir George Young: During the debate on new clause 1, Opposition Members have focused on what they perceive to be excesses resulting from the privatisation of


the utilities. That part of the debate has been rather narrow. They have argued that consumers and taxpayers have been disadvantaged. If one stands back and looks at the policy as a whole, that is demonstrably not the case.
To begin with, let us take, for example, the interests of taxpayers. When we came into office, taxpayers were losing about £50 million a week through funds invested through the nationalised industries. From the industries that we have privatised, we are now getting £50 million a week coming in, so there has been a massive turnaround in the fortunes of the nationalised industries.
The figures which concern the taxpayer totally dwarf some of the figures mentioned in this debate. Before 1979, by and large, prices for consumers were going up and, by and large, they are now going down. The case on which new clause 1 is founded—that there has been some disadvantage to taxpayers and consumers through privatising the utilities—simply does not stand up to any examination at all.
What I found more worrying about the speeches of Opposition Members, with the exception of that from the hon. Member for Monklands, East (Mrs. Liddell), was that nobody touched on the principle of whether it was worth trying to link the fortunes of a company and its shareholders with the interests of senior executives. I believe that there is a case for bridging the gap between employers and shareholders by promoting executive option schemes and the hon. Member for Monklands, East recognised it. The whole tone of the debate was critical of the principle of share option schemes for senior executives. To put the matter in some perspective, the average value of shares covered by executive share option schemes is £22,000, not the exorbitant figures mentioned by some hon. Members.
The hon. Member for Oxford, East (Mr. Smith) began by demanding action. If one looks at new clause 1, one sees that it would not produce any action at all, it would produce a report. I shall say in a moment why I do not believe that that report is necessary. I was pleased to hear that, instead of using the figures that the shadow Chancellor, the hon. Member for Dunfermline, East (Mr. Brown) has sometimes used, the hon. Member for Oxford, East used the figure of £60 million as the cost of executive share option schemes and abandoned the more extravagant claims which we have sometimes heard. The hon. Gentleman accused the Government of subcontracting their policy on this matter to the Greenbury committee—we are certainly not doing that—and he then subcontracted most of his speech to Paul Foot.
Our case is that the system has worked well for consumers. Consider what has happened to the caps. The regulators, by and large, have tightened the caps post-privatisation. BT started off at a retail prices index of minus 3 per cent. and it is now minus 7.5 per cent.
I was grateful for the speech of my hon. Friend the Member for Wirral, South (Mr. Porter). His views contrasted with what was said by the right hon. Member for Copeland (Dr. Cunningham), who believes that the regulator should intervene and said that he wanted him to interfere, regardless of whether that makes any difference to consumers' bills. The reality is that many Opposition Members are interested only in the politics of envy, regardless of any benefit to the consumer.
The hon. Member for Walsall, North (Mr. Winnick) made two points on which I want to touch. One of them was replicated by the hon. Member for Sheffield, Attercliffe (Mr. Betts). The hon. Member for Walsall, North alleged that those who now run the privatised utilities are doing the same work as before. That simply is not the case. I speak as someone who once worked for a nationalised industry. When industries are nationalised, Ministers and civil servants take a large number of the decisions, such as those about the size of the investment programme.
The nationalised industries were overmanned and not particularly well run. They certainly did very little exporting. So it is not the case that those who now run the privatised utilities are doing exactly the same work as those who ran them before. I was delighted, however, to see the hon. Member for Walsall, North back after a spell away. He was looking much better at the end of his speech than at the beginning, so I assume that that is some part of his therapy in which it was a pleasure to take part.
My hon. Friend the Member for Beaconsfield (Mr. Smith) rightly posed the question of why we should pick out the privatised utilities. Why single them out? They are in the private sector. There is no case in principle why they should have a different regime to other industries in the private sector.

Mr. David Shaw: My right hon. Friend will have noticed that I tabled an amendment to the new clause. Why does he think that the Opposition are moving this new clause, which hits home at the directors and executives in the privatised utilities, but ignores other directors, especially those in the broadcasting industry, such as the directors of London Weekend Television who had lavish pay-outs on their share options and then donated a large part of them to the Labour leader's leadership campaign? Is there some preference between the Labour leader's election campaign and the fact that executives may be benefiting by helping the nation?

Sir George Young: If my hon. Friend's amendment had been in order, I would, of course, have been able to answer that question. As it is, the House will just have to guess what the answer might have been.
My hon. Friend the Member for Beaconsfield also rightly made the point that the shareholders bear the cost of executive share options. It is they who are agreeing to diluting their interest in the company by allowing others to buy shares in the company at a preferential price. He made the point that the consumers benefit. He also said that one should examine the role of competition as an extra dimension in bringing pressure to hear on prices. In the Gas Bill, which is going through the House, we are implementing that principle.
The hon. Member for Monklands, East implied that the options were transferable to a spouse. They are not. She may have been alluding to the possibility of transferring the shares after the option has been exercised, but that is not what she said.
The House will not be surprised to hear that I cannot advise hon. Members to accept the new clause. The Inland Revenue publishes annually figures of the Exchequer costs for past years of the various tax-relieved employee financial participation schemes, including executive share option schemes. The Revenue does not break those global cost figures down between particular groups of companies and I see no good policy reason why it should.
In any event, there is a considerable amount of relevant information in the public domain. Companies are required by the Companies Act 1985 to maintain a register, which anyone can inspect, in which details of directors' interests in the companies' shares must be recorded. Where the scheme involves the issue of new shares, the register must show the number of shares under option, the period during which the option is exercisable and the exercise price. When options are exercised, it must be also be recorded in the register. The company is also obliged by law to list in its annual report or accounts the interests of its directors in the company's shares.
The stock exchange listing rules require listed companies to obtain shareholder approval at an annual general meeting for any share option schemes that involve or may involve the issue of new shares. The rules also require companies to give details to the stock exchange of all directors' share option schemes and of directors' interests in the company's shares. Much of the information mentioned in the new clause is already in the public domain. In any event, I see no basis on which the Inland Revenue could be expected to estimate the future cost of those schemes, as is required in the new clause.
Share option schemes are intended to enable companies to motivate key executives and the aim is to improve company profitability and so to benefit all shareholders, including, as was made clear in the debate, pensioners. As I said when we debated this subject in Committee, we need to remember that the main cost of such schemes falls properly on those who chiefly benefit from them—the companies and their shareholders. They carry the principal cost, not the customer nor, indeed, the taxpayer.
Tax relief schemes can be designed to link the exercise of options directly with performance. I welcome the fact that it is increasingly recognised as best practice for companies to ensure that the exercise of options depends on the attainment of tough performance targets. A recent survey found that 90 per cent. of companies floated last year intend to set targets. Indeed, the institutional investors, the Association of British Insurers and the National Association of Pension Funds, insist that it is fundamental to the exercise of options that they be subject to a realistic measure of management performance, as that is in the best interests of the company, its shareholders, customers and employees.
7 pm
My right hon. Friend the Prime Minister said a few weeks ago that bonuses and share options should be based on the performance of a company, and that stricter criteria may be required for the price at which shares are issued and for the circumstances in which they are exercised. All those matters are currently being examined by Sir Richard Greenbury's committee, whose report we await.
We have no quarrel with the idea that executives should be asked to deliver enhanced performance if they are to enjoy the benefits that share options can bring, but it is as well to remember that, unless the people at the top pull their weight and achieve good results, no one wins. If the company does not do well and the share price fails to rise, options deliver no rewards to the executives who hold them.
My right hon. Friend the Prime Minister noted that the recommendations of the committee would be addressed to companies and shareholders, but he has also said that the Government would be ready to consider any proposals

that might require legislative back-up. In short, we shall be considering further the whole question of executive remuneration—including share options—in the light of the committee's findings.
I conclude by reminding the House that, under the last Labour Government, electricity prices rose by 2 per cent. every six weeks. Under this Government, they have fallen. The House now needs to ask itself: under which management regime do consumers really prosper? Our case is that they prosper under ours. Consequently I invite the House to reject new clause 1.

Mr. Andrew Smith: I should like to acknowledge the powerful arguments made by my hon. Friends the Members for Monklands, East (Mrs. Liddell), for Stoke-on-Trent, South (Mr. Stevenson), for Barking (Ms Hodge), for Sheffield, Attercliffe (Mr. Betts), for Dudley, West (Mr. Pearson) and for Bradford, South (Mr. Sutcliffe). I warmly welcome back to the Chamber our hon. Friend the Member for Walsall, North (Mr. Winnick). It was good to see him making a characteristically robust contribution to the debate.
Replying to the debate, the Financial Secretary spent more time attempting to defend privatisation than defending the—admittedly indefensible—abuses of executive share options. In that respect he differed from the hon. Members for Wirral, South (Mr. Porter) and for Beaconsfield (Mr. Smith), who at least acknowledged that there was a problem and that something needed to be done. They must have been as disappointed as we were not to hear any promise of Government action.
The Minister did not deal with the case that my hon. Friends have made. Action is needed on the ground of fairness, and because of our responsibility for taxpayers' money. It is especially needed in the case of the privatised utilities because of their ability to exploit their monopolies and because of the fact that their share options are a one-way bet.
Having said that the Government were not subcontracting their policy on this matter to the Greenbury committee, the Financial Secretary proceeded to do just that: he said that action would follow Greenbury. That is not good enough. I commend our new clause to the House. Let us show the public that we want to act against these outrageous abuses of share options.

Question put, That the clause be read a Second time:—

The House divided: Ayes 244, Noes 283.

Division No. 123]
[7.03 pm


AYES


Abbott, Ms Diane
Benn, Rt Hon Tony


Adams, Mrs Irene
Bennett, Andrew F


Ainger, Nick
Benton, Joe


Ainsworth, Robert (Cov'try NE)
Bermingham, Gerald


Allen, Graham
Berry, Roger


Alton, David
Betts, Clive


Anderson, Donald (Swansea E)
Blair, Rt Hon Tony


Anderson, Ms Janet (Ros'dale)
Blunkett, David


Armstrong, Hilary
Boateng, Paul


Ashton, Joe
Bradley, Keith


Austin-Walker, John
Bray, Dr Jeremy


Banks, Tony (Newham NW)
Brown, Gordon (Dunfermline E)


Barron, Kevin
Brown, N (N'c'tle upon Tyne E)


Battle, John
Burden, Richard


Bayley, Hugh
Byers, Stephen


Beckett, Rt Hon Margaret
Caborn, Richard


Beith, Rt Hon A J
Callaghan, Jim






Campbell, Mrs Anne (C'bridge)
Howells, Dr. Kim (Pontypridd)


Campbell, Menzies (Fife NE)
Hoyle, Doug


Canavan, Dennis
Hughes, Robert (Aberdeen N)


Cann, Jamie
Hughes, Roy (Newport E)


Chidgey, David
Hughes, Simon (Southwark)


Chisholm, Malcolm
Hutton, John


Church, Judith
Illsley, Eric


Clapham, Michael
Jackson, Glenda (H'stead)


Clark, Dr David (South Shields)
Jackson, Helen (Shef'ld, H)


Clarke, Eric (Midlothian)
Jamieson, David


Clarke, Tom (Monklands W)
Janner, Greville


Clelland, David
Jones, Barry (Alyn and D'side)


Clwyd, Mrs Ann
Jones, leuan Wyn (Ynys Mon)


Coffey, Ann
Jones, Lynne (B'ham S O)


Cook, Frank (Stockton N)
Jones, Martyn (Clwyd, SW)


Cook, Robin (Livingston)
Jones, Nigel (Cheltenham)


Corbett, Robin
Jowell, Tessa


Corbyn, Jeremy
Kaufman, Rt Hon Gerald


Corston, Jean
Keen, Alan


Cousins, Jim
Kennedy, Jane (Lpool Brdgn)


Cunliffe, Lawrence
Khabra, Piara S


Cunningham, Jim (Covy SE)
Kilfoyle, Peter


Dalyell, Tam
Lestor, Joan (Eccles)


Darling, Alistair
Lewis, Terry


Davidson, Ian
Liddell, Mrs Helen


Davies, Bryan (Oldham C'tral)
Litherland, Robert


Davies, Rt Hon Denzil (Llanelli)
Lloyd, Tony (Stretford)


Davies, Ron (Caerphilly)
Lynne, Ms Liz


Denham, John
McAllion, John


Dewar, Donald
McAvoy, Thomas


Dixon, Don
McCartney, Ian


Dobson, Frank
McCrea, The Reverend William


Donohoe, Brian H
McFall, John


Dowd, Jim
McKelvey, William


Dunnachie, Jimmy
Mackinlay, Andrew


Dunwoody, Mrs Gwyneth
Maclennan, Robert


Eagle, Ms Angela
McMaster, Gordon


Eastham, Ken
MacShane, Denis


Etherington, Bill
McWilliam, John


Ewing, Mrs Margaret
Madden, Max


Field, Frank (Birkenhead)
Maddock, Diana


Fisher, Mark
Mahon, Alice


Flynn, Paul
Mandelson, Peter


Foster, Rt Hon Derek
Marek, Dr John


Foster, Don[...]
Marshall, David (Shettleston)


Fraser, John
Marshall, Jim (Leicester, S)


Fyfe, Maria
Martlew, Eric


Galloway, George
Maxton, John


Gapes, Mike
Meacher, Michael


Garrett, John
Meale, Alan


George, Bruce
Michael, Alun


Gerrard, Neil
Michie, Bill (Sheffield Heeley)


Gilbert, Rt Hon Dr John
Michie, Mrs Ray (Argyll & Bute)


Godman, Dr Norman A
Milburn, Alan


Godsiff, Roger
Miller, Andrew


Golding, Mrs Llin
Moonie, Dr Lewis


Gordon, Mildred
Morgan, Rhodri


Graham, Thomas
Morley, Elliot


Grant, Bernie (Tottenham)
Morris, Rt Hon Alfred (Wy'nshawe)


Griffiths, Win (Bridgend)
Morris, Estelle (B'ham Yardley)


Grocott, Bruce
Morris, Rt Hon John (Aberavon)


Gunnell, John
Mowlam, Marjorie


Hain, Peter
Mudie, George


Hall, Mike
Mullin, Chris


Hanson, David
Murphy, Paul


Harvey, Nick
Oakes, Rt Hon Gordon


Hattersley, Rt Hon Roy
O'Brien, Mike (N W'kshire)


Henderson, Doug
O'Brien, William (Normanton)


Heppell, John
O'Hara, Edward


Hill, Keith (Streatham)
Olner, Bill


Hinchliffe, David
O'Neill, Martin


Hodge, Margaret
Orme, Rt Hon Stanley


Hoey, Kate
Parry, Robert


Home Robertson, John
Pearson, Ian


Hoon, Geoffrey
Pendry, Tom


Howarth, George (Knowsley North)
Pickthall, Colin





Pike, Peter L
Steel, Rt Hon Sir David


Pope, Greg
Steinberg, Gerry


Powell, Ray (Ogmore)
Stevenson, George


Prentice, Gordon (Pendle)
Stott, Roger


Prescott, Rt Hon John
Strang, Dr. Gavin


Primarolo, Dawn
Straw, Jack


Purchase, Ken
Sutcliffe, Gerry


Quin, Ms Joyce
Taylor, Mrs Ann (Dewsbury)


Radice, Giles
Taylor, Matthew (Truro)


Randall, Stuart
Tipping, Paddy


Raynsford, Nick
Turner, Dennis


Redmond, Martin
Tyler, Paul


Reid, Dr John
Vaz, Keith


Robinson, Geoffrey (Co'try NW)
Walker, Rt Hon Sir Harold


Roche, Mrs Barbara
Walley, Joan


Rogers, Allan
Wardell, Gareth (Gower)


Rooker, Jeff
Wareing, Robert N


Rooney, Terry
Watson, Mike


Ross, Ernie (Dundee W)
Wicks, Malcolm


Rowlands, Ted
Wigley, Dafydd


Ruddock, Joan
Williams, Rt Hon Alan (Sw'n W)


Sedgemore, Brian
Williams, Alan W (Carmarthen)


Sheerman, Barry
Winnick, David


Sheldon, Rt Hon Robert
Wise, Audrey


Shore, Rt Hon Peter
Worthington, Tony


Skinner, Dennis
Wray, Jimmy


Smith, Andrew (Oxford E)
Young, David (Bolton SE)


Smith, Chris (Isl'ton S & F'sbury)



Smith, Llew (Blaenau Gwent)
Tellers for the Ayes:


Soley, Clive
Mr. John Cummings and


Spellar, John
Mr. Jon Owen Jones.




NOES


Ainsworth, Peter (East Surrey)
Carlisle, Sir Kenneth (Lincoln)


Aitken, Rt Hon Jonathan
Carrington, Matthew


Alexander, Richard
Carttiss, Michael


Alison, Rt Hon Michael (Selby)
Channon, Rt Hon Paul


Allason, Rupert (Torbay)
Chapman, Sydney


Ancram, Michael
Clappison, James


Arbuthnot, James
Clark, Dr Michael (Rochford)


Arnold, Jacques (Gravesham)
Clarke, Rt Hon Kenneth (Ru'clif)


Arnold, Sir Thomas (Hazel Grv)
Clifton-Brown, Geoffrey


Ashby, David
Coe, Sebastian


Atkins, Robert
Colvin, Michael


Atkinson, Peter (Hexham)
Congdon, David


Baker, Rt Hon Kenneth (Mole V)
Conway, Derek


Baker, Nicholas (North Dorset)
Coombs, Anthony (Wyre For'st)


Baldry, Tony
Coombs, Simon (Swindon)


Banks, Matthew (Southport)
Cope, Rt Hon Sir John


Banks, Robert (Harrogate)
Cormack, Sir Patrick


Bates, Michael
Couchman, James


Batiste, Spencer
Cran, James


Bellingham, Henry
Currie, Mrs Edwina (S D'by'ire)


Bendall, Vivian
Curry, David (Skipton & Ripon)


Beresford, Sir Paul
Davies, Quentin (Stamford)


Biffen, Rt Hon John
Davis, David (Boothferry)


Bonsor, Sir Nicholas
Day, Stephen


Booth, Hartley
Dicks, Terry


Boswell, Tim
Douglas-Hamilton, Lord James


Bottomley, Peter (Eltham)
Dover, Den


Bottomley, Rt Hon Virginia
Duncan, Alan


Bowden, Sir Andrew
Duncan-Smith, Iain


Bowis, John
Dunn, Bob


Boyson, Rt Hon Sir Rhodes
Durant, Sir Anthony


Brandreth, Gyles
Eggar, Rt Hon Tim


Brazier, Julian
Elletson, Harold


Bright, Sir Graham
Emery, Rt Hon Sir Peter


Brooke, Rt Hon Peter
Evans, Jonathan (Brecon)


Brown, M (Brigg & Cl'thorpes)
Evans, Nigel (Ribble Valley)


Browning, Mrs Angela
Evans, Roger (Monmouth)


Bruce, Ian (Dorset)
Evennett, David


Budgen, Nicholas
Faber, David


Burns, Simon
Fabricant, Michael


Burt, Alistair
Field, Barry (Isle of Wight)


Butler, Peter
Fishburn, Dudley


Carlisle, John (Luton North)
Forman, Nigel






Forsyth, Rt Hon Michael (Stirling)
Luff, Peter


Forth, Eric
Lyell, Rt Hon Sir Nicholas


Fowler, Rt Hon Sir Norman
MacGregor, Rt Hon John


Fox, Dr Liam (Woodspring)
MacKay, Andrew


Fox, Sir Marcus (Shipley)
Maclean, David


Freeman, Rt Hon Roger
McLoughlin, Patrick


French, Douglas
McNair-Wilson, Sir Patrick


Fry, Sir Peter
Maitland, Lady Olga


Gale, Roger
Malone, Gerald


Gallie, Phil
Mans, Keith


Gardiner, Sir George
Marland, Paul


Garel-Jones, Rt Hon Tristan
Marshall, John (Hendon S)


Garnier, Edward
Martin, David (Portsmouth S)


Gill, Christopher
Mellor, Rt Hon David


Gillan, Cheryl
Merchant Piers


Goodlad, Rt Hon Alastair
Mills, Iain


Goodson-Wickes, Dr Charles
Mitchell, Andrew (Gedling)


Gorman, Mrs Teresa
Mitchell, Sir David (NW Hants)


Gorst, Sir John
Moate, Sir Roger


Grant, Sir A (SW Cambs)
Monro, Sir Hector


Greenway, Harry (Ealing N)
Montgomery, Sir Fergus


Greenway, John (Ryedale)
Moss, Malcolm


Griffiths, Peter (Portsmouth, N)
Needham, Rt Hon Richard


Gummer, Rt Hon John Selwyn
Nelson, Anthony


Hague, William
Neubert, Sir Michael


Hamilton, Rt Hon Sir Archibald
Newton, Rt Hon Tony


Hamilton, Neil (Tatton)
Nicholls, Patrick


Hampson, Dr Keith
Nicholson, David (Taunton)


Hanley, Rt Hon Jeremy
Nicholson, Emma (Devon West)


Hannam, Sir John
Norris, Steve


Haselhurst, Alan
Onslow, Rt Hon Sir Cranley


Hawkins, Nick
Oppenheim, Phillip


Hawksley, Warren
Ottaway, Richard


Hayes, Jerry
Page, Richard


Heald, Oliver
Paice, James


Heathcoat-Amory, David
Patnick, Sir Irvine


Hendry, Charles
Patten, Rt Hon John


Higgins, Rt Hon Sir Terence
Pattie, Rt Hon Sir Geoffrey


Hill, James (Southampton Test)
Peacock, Mrs Elizabeth


Hogg, Rt Hon Douglas (G'tham)
Pickles, Eric


Horam, John
Porter, Barry (Wirral S)


Hordern, Rt Hon Sir Peter
Porter, David (Waveney)


Howard, Rt Hon Michael
Portillo, Rt Hon Michael


Howarth, Alan (Strat'rd-on-A)
Powell, William (Corby)


Howell, Rt Hon David (G'dford)
Rathbone, Tim


Howell, Sir Ralph (N Norfolk)
Redwood, Rt Hon John


Hughes, Robert G (Harrow W)
Renton, Rt Hon Tim


Hunt, Rt Hon David (Wirral W)
Richards, Rod


Hunt, Sir John (Ravensbourne)
Riddick, Graham


Hunter, Andrew
Rifkind, Rt Hon Malcolm


Jack, Michael
Robathan, Andrew


Jackson, Robert (Wantage)
Roberts, Rt Hon Sir Wyn


Jenkin, Bernard
Robertson, Raymond (Ab'd'n S)


Johnson Smith, Sir Geoffrey
Robinson, Mark (Somerton)


Jones, Gwilym (Cardiff N)
Roe, Mrs Marion (Broxbourne)


Jones, Robert B (W Hertfdshr)
Rowe, Andrew (Mid Kent)


Jopling, Rt Hon Michael
Rumbold, Rt Hon Dame Angela


Kellett-Bowman, Dame Elaine
Ryder, Rt Hon Richard


Key, Robert
Sackville, Tom


King, Rt Hon Tom
Sainsbury, Rt Hon Sir Timothy


Knapman, Roger
Scott, Rt Hon Sir Nicholas


Knight, Mrs Angela (Erewash)
Shaw, David (Dover)


Knight, Greg (Derby N)
Shaw, Sir Giles (Pudsey)


Knight, Dame Jill (Bir'm E'st'n)
Shephard, Rt Hon Gillian


Knox, Sir David
Shepherd, Colin (Hereford)


Kynoch, George (Kincardine)
Shepherd, Richard (Aldridge)


Lait, Mrs Jacqui
Shersby, Michael


Lang, Rt Hon Ian
Sims, Roger


Lawrence, Sir Ivan
Skeet, Sir Trevor


Legg, Barry
Smith, Tim (Beaconsfield)


Lennox-Boyd, Sir Mark
Soames, Nicholas


Lester, Jim (Broxtowe)
Spencer, Sir Derek


Lidington, David
Spicer, Sir James (W Dorset)


Lightbown, David
Spicer, Michael (S Worcs)


Lilley, Rt Hon Peter
Spink, Dr Robert


Lloyd, Rt Hon Sir Peter (Fareham)
Spring, Richard





Sproat, Iain
Trend, Michael


Squire, Robin (Hornchurch)
Twinn, Dr Ian


Stanley, Rt Hon Sir John
Vaughan, Sir Gerard


Steen, Anthony
Waldegrave, Rt Hon William


Stephen, Michael
Walden, George


Stem, Michael
Walker, Bill (N Tayside)


Stewart, Allan
Waller, Gary


Streeter, Gary
Wardle, Charles (Bexhill)


Sumberg, David
Waterson, Nigel


Sweeney, Walter
Watts, John


Sykes, John
Wells, Bowen


Tapsell, Sir Peter
Whitney, Ray


Taylor, Ian (Esher)
Whittingdale, John


Taylor, John M (Solihull)
Widdecombe, Ann


Taylor, Sir Teddy (Southend, E)
Wiggin, Sir Jerry



Wilkinson, John


Temple-Morris, Peter
Winterton, Mrs Ann (Congleton)


Thomason, Roy
Wolfson, Mark


Thompson, Sir Donald (C'er V)
Wood, Timothy


Thompson, Patrick (Norwich N)
Yeo, Tim


Thornton, Sir Malcolm
Young, Rt Hon Sir George


Thurnham, Peter



Townsend, Cyrll D (Bexl'yh'th)
Tellers for the Noes:


Tracey, Richard
Mr. Timothy Kirkhope and


Tredinnick, David
Mr. David Willetts.

Question accordingly negatived.

New clause 4

POSTPONEMENT OF SELF-ASSESSMENT

`(1) In subsection (2) of section 199 of the Finance Act 1994, for "1996–97" there shall be substituted "1997–98
(2) In subsection (3) of section 199 of the Finance Act 1994, for "1996" there shall be substituted "1997".'.—[Ms Armstrong.]

Brought up, and read the First time.

Ms Armstrong: I beg to move, That the clause be read a Second time.

Madam Deputy Speaker (Dame Janet Fookes): With this, it will be convenient to discuss amendment No. 7, in clause 95, page 107, line 37, leave out '1996–97' and insert '1997–98'.

Ms Armstrong: Once again, we return to self-assessment. We do so because we foresee problems for the Government who are in office when the proposed provisions take effect. The factor dominating many of our debates in Committee was the complexity of taxation legislation. Two of the aims of self-assessment are for the taxation process to be simplified and for it to be made open to taxpayers who will, in a new way, become liable for self-assessment. We remain unconvinced—we take this view because of the way in which the Government have framed the self-assessment procedure and developed the complexity of legislation in general—that self-assessment will work in the interests of taxpayers and will secure the advantages that the Government were trumpeting when they first introduced the principle.
The Opposition are in favour of the principle of self-assessment but we are wary of the proposed manner of implementation. There was a clear defeat for the Government in Committee—it added to the defeat that the Government suffered on the imposition of value added tax on domestic fuel, which took place on the Floor of the House—on an amendment tabled by the hon. Member for Beaconsfield (Mr. Smith), which is now known, as I understand it, as the Smith amendment. The amendment was tabled in an endeavour to simplify the mechanism of tax law.
Members of the Committee felt so strongly that the Government suffered a defeat. It is clear, however, that although members of the Committee pushed the Government to introduce measures to simplify taxation legislation, we are still a long way from having a mechanism whereby legislation can make taxation simpler.
This year's Finance Bill is one of the longest in history and is testament to the sheer complexity of British taxation legislation. The Bill was put down by commentators as one that contained little contentious legislation. The Budget was seen as simple, not too contentious and fairly neutral. Even so, in Committee, clause after clause was described as impenetrable and extremely complex. Even hon. Members who, before they came into the House, earned their professional reputations as interpreters of and advisers on tax law, made that point. Indeed, many of the people who have talked to us during the passage of the Bill have said that it is complex and have called for the legislation to be simplified. The Institute of Taxation is one of the many organisations that have made this case.
We are moving ahead quickly with self-assessment, despite the fact that both sides of the House recognise that taxation legislation has become increasingly complex and that it is increasingly difficult to thread one's way through it. That is the context in which self-assessment is being introduced. We are fearful about the introduction of self-assessment at this stage. We all acknowledge that it will be quite a culture shock for many taxpayers and that it may lead to all sorts of difficulties which will make taxpayers upset and which will make the Government of the day fairly unpopular.
The Financial Secretary has written to my hon. Friend the Member for Darlington (Mr. Milburn); my hon. Friend is not feeling well today which is why I am dealing with the letter. The Minister was answering questions raised in Committee relating to the introduction of self-assessment. I am especially concerned about two aspects. The first is risk analysis and how the Government intend to pursue that matter. The second is advertising and how the Government intend to ensure that people who will be eligible for self-assessment know what is coming and how to deal with it.
On the latter point, the Government say that they estimate that they will spend some £25 million over the next three years in a public information campaign, and that on
present plans, they expect to spend some £15 million on advertising, mainly television and press. The remaining £10 million is intended to fund supporting activity and materials".
The letter gives no indication of when the campaign will start and no indication that it has already started. If the Government are serious about their plans, they should be doing work now. The general public and the taxpayers concerned should already be aware of what will hit them next year.
We propose, through the new clause, simply that the Government should delay the introduction of these measures for a year so that the House can be assured that every possible means has been taken to ensure that taxpayers and Inland Revenue staff know what is expected of them. We also need to be sure that the cultural change, which the Government acknowledge is necessary, has

begun, both in terms of the taxpayers involved and Inland Revenue staff. We remain unconvinced that this is happening.
In his letter the Minister raises the issue of risk analysis and he describes how the Government intend to monitor taxpayers who submit forms. Obviously, each individual form will not be analysed rigorously so the Government will make a risk analysis of the number of forms that should be examined and of what, in terms of an individual taxpayer, should lead Inland Revenue staff to examine the form. The Minister also says:
the present assumption, on the basis of research to date, is that following risk analysis something like a third of returns will be considered for enquiry, with enquiries actually being made in something like two thirds of those cases. Of those enquiries, only a small percentage (as now) will involve a detailed examination of technical aspects or a full investigation of the underlying records.
That is not very reassuring.
There is to be a wholly new means by which people will fill in their tax liability forms. We want to know to what research the Minister refers. Is it research from the pilot studies on self-assessment currently being undertaken? The risk analysis for existing forms may not be the same as that required for self-assessment.
The temptations may be different under self-assessment. I want to be reassured that the Government are absolutely sure that they have the right criteria for identifying the forms of taxpayers whom they want to examine rigorously in terms of whether they have submitted the forms properly and in terms of whether they are declaring what needs to be declared. I am not implying that everyone will automatically cheat—far from it—but I am making the point that this is a new means of assessment; we have not experienced this before.
We do not want to read headlines in the tabloid press about it having uncovered someone who has said on the self-assessment form that he is liable for a small amount of tax, but who has not declared all sorts of things. That would put the whole system into disrepute and would undermine the general public's confidence in it. It is, therefore, important that the Government err on the side of caution in the early years of the process. The Minister says in his letter that the figures are "highly provisional". I hope that they are and I hope that he can reassure us more than he did in the letter.
If self-assessment is part of the Government's drive to reduce the number of Inland Revenue staff, it will undoubtedly fail. The Inland Revenue currently proposes to reduce staff levels from 54,000 in April 1995 to 48,000 in April 1988 and to 42,000 by April 2001. The latter round of job cuts includes some 3,000 job losses as a result of the introduction of self-assessment. The Inland Revenue Staff Federation and the Opposition are pressing the Government to redeploy staff on the customer service side of simplified assessment as well as on compliance and investigation work instead of making them redundant.
We maintain our deep concern about the manner of the introduction of what was a sound principle. We back the sound principle, but we remain unconvinced by the Government's determination to introduce the measures in a serious way. Unless the Government can reassure us, we shall call on the House to vote to delay the introduction of the measures for a further year until we can be assured about the manner of implementation of this good principle.

Mr. Robert Sheldon: Like my hon. Friend the Member for Durham, North-West (Ms Armstrong), I am in favour of the principle of self-assessment. We have what has been called a Rolls-Royce system, whereby the Inland Revenue does all the work and taxpayers merely answer a few questions. The system will change fundamentally to one in which the taxpayer is asked to fill in forms on a range of matters in which they have not previously been involved. The United States, which is the model for this sort of thing, has been at it for a long time. Accountants who deal with people with modest tax dues are used to handling such matters. Here we are starting from scratch and there are serious problems.
The particular problem that I am worried about is the need for simpler legislation. My hon. Friend the Member for Durham, North-West was right to draw attention to that. One book in Somerset house contained all the income tax legislation for 1840 to 1855. Now, there is a whole shelf of regulations for each year. So the mass of problems has undoubtedly increased enormously. That means that the ordinary taxpayer has to be guided through. I do not believe that the work has been done sufficiently well until now.
As my hon. Friend rightly said, we are dealing with a decline in the morale of Inland Revenue staff. The Government cannot improve the staff's morale when they are cutting their jobs. To give them new responsibilities at such a time could be dangerous. So it is right to talk about the risk factor. There is the greater danger that the new system could become a matter of some disrepute. An attempt will be made to separate out fraud from genuine mistakes. There will be a large number of genuine mistakes. However much is spent on advertisements and background, a large number of people will come to self-assessment unprepared and will make mistakes. It will be a serious matter to separate mistakes which arise out of the novelty of the system from those which arise out of less worthy motives.
The legislation is being rushed. We have to be very careful about that. We have had a large number of pieces of legislation which have not been properly considered. Self-assessment is of such fundamental importance, particularly to a Government who talk about reducing the level of income tax, and especially when there will be further complications, that it needs further careful consideration.
The letter that the Financial Secretary sent to my hon. Friend the Member for Darlington (Mr. Milburn), which my hon. Friend the Member for Durham, North-West quoted, says:
These broad figures are highly provisional".
It is a bit late in the day to have highly provisional assessments. We should be coming to fairly clear conclusions at this stage. For those reasons, a delay such as that proposed in the new clause should be accepted.

Sir George Young: I am grateful to both hon. Members who have spoken for their support in principle of the move towards self-assessment. I agree with what they both said about the need to move towards a less complex system. I believe that self-assessment will be

simpler. I remind the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) that those taxpayers who do not want to go the final mile and assess themselves will not need to do so. They will be able to complete the return broadly as they do now and send it in a few months earlier. The Inland Revenue will do the final calculations for them.
I cannot accept the new clause. It would put back the introduction of self-assessment by one year from 1996–97 to 1997–98. A similar amendment was tabled last year, but was not moved in the Standing Committee.
I should like to respond to some of the points that were raised in the debate, particularly publicity and compliance. I can confirm that a substantial programme of publicity and education for taxpayers is planned and is already under way. So far, it has covered raising awareness and understanding of the changes among tax advisers through mailings and presentations. As I said in the debates in Standing Committee, a major advertising campaign, aimed directly at the 9 million people who will receive tax returns, using television and national press as well as specialist magazines, is due to be launched before the summer and will continue until well after self-assessment has been introduced. That will be backed by leaflets and video material.
As for compliance, a number of hon. Members have seen the letter which I wrote to the hon. Member for Darlington (Mr. Milburn), whom I am sorry to hear is not well. All tax returns will be checked. They will be subjected to an initial risk analysis which will take account, not only of the information in the taxpayers' return, but of information from third parties, previous history and so on. Following that initial risk analysis, a percentage of returns regarded as potentially presenting a high risk will be reviewed in detail for inquiry. In a percentage of those cases, inquiries will be started.
The inquiries needed to deal with the risks identified may range from straightforward clarification of individual items to more detailed examination of one or more technical issues, or right through to full investigation of the taxpayer's affairs. In addition, a small percentage of cases may be selected for inquiry on an entirely random basis to increase deterrence and to enable the Revenue to monitor compliance levels and identify new areas of risk. We have already devoted substantial resources to tackling tax evasion. There has been a 20 per cent. increase in compliance resources in the past six years. That will not change under self-assessment.
The hon. Member for Durham, North-West expressed anxiety about compliance. The Revenue's plans are at least to maintain present coverage levels for the more searching types of inquiry and, indeed, gradually to increase them both by switching resources into compliance work and by improving compliance training, organisation and working methods.
Let me confirm the good progress that is being made in the move towards self-assessment. Returns for the first year of self-assessment will not be issued until April 1997—still two years away. Nothing that has happened in the past few months has changed the Government's considered view that we should proceed to the planned timetable. Indeed as this year goes by, we are passing a number of milestones which would


make it more difficult to adopt the course suggested by the new clause.
The main legislation was passed last year and more legislation is before the House now. Businesses and tax practitioners are gearing up for the changes in line with the published timetable. We are well on track for the implementation of self-assessment as planned. We have an extensive education and publicity programme. We have been testing the new tax return and the results of this latest consultation are encouraging. Some 90 per cent. of the volunteers completed the return well enough for the Inland Revenue to process it. However, there is still room for improving the tax return so the consultation and testing will continue throughout 1995, starting later this week with the full trial of self-assessment in Leicester, involving some 5,000 taxpayers.
In conclusion, delaying the start of self-assessment is not sensible in practical terms. It would only cause confusion and add a layer of complexity. Nor is it necessary. I urge the House to reject the new clause.

Question put, That the clause be read a Second time:—

The House divided: Ayes 244, Noes 277.

Division No. 124]
[7.38 pm


AYES


Abbott, Ms Diane
Clapham, Michael


Adams, Mrs Irene
Clark, Dr David (South Shields)


Ainger, Nick
Clarke Eric (Midlothian)


Ainsworth, Robert (Covty NE)
Clarke, Tom (Monklands W)


Allen, Graham
Clelland, David


Alton, David
Clwyd, Mrs Ann


Anderson, Donald (Swansea E)
Coffey, Ann


Anderson, Ms Janet (Ros'dale)
Cook, Frank (Stockton N)


Armstrong, Hilary
Cook, Robin (Livingston)


Ashton, Joe
Corbett, Robin


Austin-Walker, John
Corbyn, Jeremy


Banks, Tony (Newham NW)
Corston, Jean


Barron, Kevin
Cousins, Jim


Battle, John
Cunliffe, Lawrence


Bayley, Hugh
Cunningham, Jim (Covy SE)


Beckett, Rt Hon Margaret
Dalyell, Tam


Beith, Rt Hon A J
Darling, Alistair


Benn, Rt Hon Tony
Davidson, Ian


Bennett, Andrew F
Davies, Bryan (Oldham C'tral)


Benton, Joe
Davies, Rt Hon Denzil (Llanelli)


Bermingham, Gerald
Davies, Ron (Caerphilly)


Berry, Roger
Denham, John


Betts, Clive
Dewar, Donald


Blunkett, David
Dixon, Don


Boateng, Paul
Dobson, Frank


Bradley, Keith
Donohoe, Brian H


Bray, Dr Jeremy
Dowd, Jim


Brown, Gordon (Dunfermline E)
Dunnachie, Jimmy


Brown, N (N'c'tle upon Tyne E)
Dunwoody, Mrs Gwyneth


Burden, Richard
Eagle, Ms Angela


Byers, Stephen
Etherington, Bill


Caborn, Richard
Ewing, Mrs Margaret


Callaghan, Jim
Field, Frank (Birkenhead)


Campbell, Mrs Anne (C'bridge)
Fisher, Mark


Campbell, Menzies (Fife NE)
Flynn, Paul


Campbell-Savours, D N
Foster, Rt Hon Derek


Canavan, Dennis
Foster, Don (Bath)


Cann, Jamie
Fraser, John


Chidgey, David
Fyfe, Maria


Chisholm, Malcolm
Galloway, George


Church, Judith
Gapes, Mike





Garrett, John
Meacher, Michael


George, Bruce
Meale, Alan


Gerrard, Neil
Michael, Alun


Gilbert, Rt Hon Dr John
Michie, Bill (Sheffield Heeley)


Godman, Dr Norman A
Michie, Mrs Ray (Argyll & Bute)


Godsiff, Roger
Milburn, Alan


Golding, Mrs Llin
Miller, Andrew


Gordon, Mildred
Moonie, Dr Lewis


Graham, Thomas
Morgan, Rhodri


Grant, Bernie (Tottenham)
Morley, Elliot


Griffiths, Win (Bridgend)
Morris, Rt Hon Alfred (Wy'nshawe)


Grocott, Bruce
Morris, Estelle (B'ham Yardley)


Gunnell, John
Morris, Rt Hon John (Aberavon)


Hain, Peter
Mowlam, Marjorie


Hall, Mike
Mudie, George


Hanson, David
Mullin, Chris


Harvey, Nick
Murphy, Paul


Hattersley, Rt Hon Roy
Oakes, Rt Hon Gordon


Henderson, Doug
O'Brien, Mike (N W'kshire)


Heppell, John
O'Brien, William (Normanton)


Hill, Keith (Streatham)
O'Hara, Edward


Hinchliffe, David
Olner, Bill


Hodge, Margaret
O'Neill, Martin


Hoey, Kate
Parry, Robert


Home Robertson, John
Pearson, Ian


Hoon, Geoffrey
Pendry, Tom


Howarth, George (Knowsley North)
Pickthall, Colin


Howells, Dr. Kim (Pontypridd)
Pike, Peter L


Hoyle, Doug
Pope, Greg


Hughes, Robert (Aberdeen N)
Powell, Ray (Ogmore)


Hughes, Roy (Newport E)
Prentice, Gordon (Pendle)


Hughes, Simon (Southwark)
Prescott, Rt Hon John


Hutton, John
Primarolo, Dawn


Illsley, Eric
Purchase, Ken


Jackson, Glenda (H'stead)
Quin, Ms Joyce


Jackson, Helen (Shefld, H)
Radice, Giles


Jamieson, David
Randall, Stuart


Janner, Greville
Raynsford, Nick


Jones, Barry (Alyn and D'side)
Redmond, Martin


Jones, Ieuan Wyn (Ynys Mon)
Reid, Dr John


Jones, Lynne (B'ham S O)
Robinson, Geoffrey (Co'try NW)


Jones, Martyn (Clwyd, SW)
Roche, Mrs Barbara


Jones, Nigel (Cheltenham)
Rogers, Allan


Jowell, Tessa
Rooker, Jeff


Kaufman, Rt Hon Gerald
Rooney, Terry


Keen, Alan
Ross, Ernie (Dundee W)


Kennedy, Jane (Lpool Brdgn)
Ross, William (E Londonderry)


Khabra, Piara S
Rowlands, Ted


Kilfoyle, Peter
Ruddock, Joan


Lestor, Joan (Eccles)
Sedgemore, Brian


Lewis, Terry
Sheerman, Barry


Liddell, Mrs Helen
Sheldon, Rt Hon Robert


Litherland, Robert
Shore, Rt Hon Peter


Lloyd, Tony (Stretford)
Skinner, Dennis


Llwyd, Elfyn
Smith, Andrew (Oxford E)


Lynne, Ms Liz
Smith, Chris (Isl'ton S & F'sbury)


McAllion, John
Smith, Llew (Blaenau Gwent)


McAvoy, Thomas
Snape, Peter


McCartney, Ian
Soley, Clive


McCrea, The Reverend William
Spellar, John


McFall, John
Steel, Rt Hon Sir David


McKelvey, William
Steinberg, Gerry


Mackinlay, Andrew
Stevenson, George


McMaster, Gordon
Stott, Roger


MacShane, Denis
Strang, Dr. Gavin


McWilliam, John
Straw, Jack


Madden, Max
Sutcliffe, Gerry


Maddock, Diana
Taylor, Mrs Ann (Dewsbury)


Mahon, Alice
Taylor, Matthew (Truro)


Mandelson, Peter
Tipping, Paddy


Marek, Dr John
Turner, Dennis


Marshall, David (Shettleston)
Tyler, Paul


Marshall, Jim (Leicester, S)
Vaz, Keith


Martin, Michael J (Springburn)
Walker, Rt Hon Sir Harold


Martlew, Eric
Walley, Joan


Maxton, John
Wardell, Gareth (Gower)






Wareing, Robert N
Worthington, Tony


Watson, Mike
Wray, Jimmy


Wicks, Malcolm
Young, David (Bolton SE)


Williams, Rt Hon Alan (Sw'n W)



Williams, Alan W (Carmarthen)
Tellers for the Ayes:


Winnick, David
Mr. Jon Owen Jones and


Wise, Audrey
Mr. John Cummings.




NOES


Ainsworth, Peter (East Surrey)
Duncan, Alan


Aitken, Rt Hon Jonathan
Duncan-Smith, Iain


Alexander, Richard
Dunn, Bob


Alison, Rt Hon Michael (Selby)
Durant, Sir Anthony


Allason, Rupert (Torbay)
Eggar, Rt Hon Tim


Ancram, Michael
Elletson, Harold


Arbuthnot, James
Emery, Rt Hon Sir Peter


Arnold, Jacques (Gravesham)
Evans, Jonathan (Brecon)


Arnold, Sir Thomas (Hazel Grv)
Evans, Nigel (Ribble Valley)


Ashby, David
Evans, Roger (Monmouth)


Atkins, Robert
Evennett, David


Atkinson, Peter (Hexham)
Faber, David


Baker, Nicholas (North Dorset)
Fabricant, Michael


Baldry, Tony
Field, Barry (Isle of Wight)


Banks, Matthew (Southport)
Fishburn, Dudley


Bates, Michael
Forman, Nigel


Batiste, Spencer
Forsyth, Rt Hon Michael (Stirling)


Bellingham, Henry
Forth, Eric


Bendall, Vivian
Fowler, Rt Hon Sir Norman


Beresford, Sir Paul
Fox, Sir Marcus (Shipley)


Biffen, Rt Hon John
Freeman, Rt Hon Roger


Bonsor, Sir Nicholas
French, Douglas


Booth, Hartley
Fry, Sir Peter


Boswell, Tim
Gale, Roger


Bottomley, Peter (Eltham)
Gallie, Phil


Bottomley, Rt Hon Virginia
Gardiner, Sir George


Bowden, Sir Andrew
Garel-Jones, Rt Hon Tristan


Bowis, John
Garnier, Edward


Boyson, Rt Hon Sir Rhodes
Gill, Christopher


Brandreth, Gyles
Gillan, Cheryl


Brazier, Julian
Goodson-Wickes, Dr Charles


Bright, Sir Graham
Gorman, Mrs Teresa


Brooke, Rt Hon Peter
Gorst, Sir John


Brown, M (Brigg & Cl'thorpes)
Grant, Sir A (SW Cambs)


Browning, Mrs Angela
Greenway, Harry (Ealing N)


Bruce, Ian (Dorset)
Greenway, John (Ryedale)


Budgen, Nicholas
Griffiths, Peter (Portsmouth, N)


Burt, Alistair
Gummer, Rt Hon John Selwyn


Butler, Peter
Hague, William


Carlisle, John (Luton North)
Hamilton, Rt Hon Sir Archibald


Carlisle, Sir Kenneth (Lincoln)
Hamilton, Neil (Tatton)


Carrington, Matthew
Hampson, Dr Keith


Carttiss, Michael
Hanley, Rt Hon Jeremy


Channon, Rt Hon Paul
Hannam, Sir John


Chapman, Sydney
Haselhurst, Alan


Clappison, James
Hawkins, Nick


Clark, Dr Michael (Rochford)
Hawksley, Warren


Clarke, Rt Hon Kenneth (Ru'clif)
Hayes, Jerry


Clifton-Brown, Geoffrey
Heald, Oliver


Coe, Sebastian
Heathcoat-Amory, David


Colvin, Michael
Hendry, Charles


Congdon, David
Higgins, Rt Hon Sir Terence


Conway, Derek
Hill, James (Southampton Test)


Coombs, Anthony (Wyre For'st)
Hogg, Rt Hon Douglas (G'tham)


Coombs, Simon (Swindon)
Horam, John


Cope, Rt Hon Sir John
Hordern, Rt Hon Sir Peter


Cormack, Sir Patrick
Howard, Rt Hon Michael


Couchman, James
Howarth, Alan (Strat'rd-on-A)


Cran, James
Howell, Sir Ralph (N Norfolk)


Currie, Mrs Edwina (S D'by'ire)
Hughes, Robert G (Harrow W)


Curry, David (Skipton & Ripon)
Hunt, Rt Hon David (Wirral W)


Davies, Quentin (Stamford)
Hunt, Sir John (Ravensbourne)


Davis, David (Boothferry)
Hunter, Andrew


Day, Stephen
Jack, Michael


Dicks, Terry
Jackson, Robert (Wantage)


Douglas-Hamilton, Lord James
Jenkin, Bernard


Dover, Den
Johnson Smith, Sir Geoffrey





Jones, Gwilym (Cardiff N)
Robertson, Raymond (Ab'd'n S)


Jones, Robert B (W Hertfdshr)
Robinson, Mark (Somerton)


Jopling, Rt Hon Michael
Roe, Mrs Marion (Broxbourne)


Kellett-Bowman, Dame Elaine
Rumbold, Rt Hon Dame Angela


Key, Robert
Ryder, Rt Hon Richard


King, Rt Hon Tom
Sackville, Tom


Kirkhope, Timothy
Sainsbury, Rt Hon Sir Timothy


Knapman, Roger
Scott, Rt Hon Sir Nicholas


Knight, Mrs Angela (Erewash)
Shaw, David (Dover)


Knight, Greg (Derby N)
Shaw, Sir Giles (Pudsey)


Knight, Dame Jill (Bir'm E'st'n)
Shephard, Rt Hon Gillian


Knox, Sir David
Shepherd, Colin (Hereford)


Kynoch, George (Kincardine)
Shepherd, Richard (Aldridge)


Lait, Mrs Jacqui
Shersby, Michael


Lang, Rt Hon Ian
Sims, Roger


Lawrence, Sir Ivan
Skeet, Sir Trevor


Legg, Barry
Smith, Tim (Beaconsfield)


Lennox-Boyd, Sir Mark
Soames, Nicholas


Lester, Jim (Broxtowe)
Spencer, Sir Derek


Lidington, David
Spicer, Sir James (W Dorset)


Lightbown, David
Spicer, Michael (S Worcs)


Lilley, Rt Hon Peter
Spink, Dr Robert


Lloyd, Rt Hon Sir Peter (Fareham)
Spring, Richard


Luff, Peter
Sproat, Iain


Lyell, Rt Hon Sir Nicholas
Squire, Robin (Hornchurch)


MacGregor, Rt Hon John
Stanley, Rt Hon Sir John


MacKay, Andrew
Steen, Anthony


Maclean, David
Stephen, Michael


McLoughlin, Patrick
Stem, Michael


McNair-Wilson, Sir Patrick
Stewart, Allan


Maitland, Lady Olga
Streeter, Gary


Malone, Gerald
Sumberg, David


Mans, Keith
Sweeney, Walter


Marland, Paul
Sykes, John


Marshall, John (Hendon S)
Tapsell, Sir Peter


Martin, David (Portsmouth S)
Taylor, Ian (Esher)


Mellor, Rt Hon David
Taylor, John M (Solihull)


Merchant, Piers
Taylor, Sir Teddy (Southend, E)


Mills, Iain
Temple-Morris, Peter


Mitchell, Andrew (Gedling)
Thomason, Roy


Mitchell, Sir David (NW Hants)



Moate, Sir Roger
Thompson, Sir Donald (C'er V)


Monro, Sir Hector
Thompson, Patrick (Norwich N)


Montgomery, Sir Fergus
Thornton, Sir Malcolm


Moss, Malcolm
Thurnham, Peter


Needham, Rt Hon Richard
Townsend, Cyril D (Bexl'yh'th)


Nelson, Anthony
Tracey, Richard


Neubert, Sir Michael
Tredinnick, David


Newton, Rt Hon Tony
Trend, Michael


Nicholls, Patrick
Twinn, Dr Ian


Nicholson, David (Taunton)
Vaughan, Sir Gerard


Nicholson, Emma (Devon West)
Waldegrave, Rt Hon William


Norris, Steve
Walden, George


Onslow, Rt Hon Sir Cranley
Walker, Bill (N Tayside)


Oppenheim, Phillip
Waller, Gary


Ottaway, Richard
Wardle, Charles (Bexhill)


Page, Richard
Waterson, Nigel


Paice, James
Watts, John


Patnick, Sir Irvine
Wells, Bowen


Patten, Rt Hon John
Whitney, Ray


Pattie, Rt Hon Sir Geoffrey
Whittingdale, John


Peacock, Mrs Elizabeth
Widdecombe, Ann


Pickles, Eric
Wiggin, Sir Jerry


Porter, Barry (Wirral S)
Wilkinson, John


Porter, David (Waveney)
Willetts, David


Portillo, Rt Hon Michael
Winterton, Mrs Ann (Congleton)


Powell, William (Corby)
Wolfson, Mark


Rathbone, Tim
Wood, Timothy


Redwood, Rt Hon John
Yeo, Tim


Renton, Rt Hon Tim
Young, Rt Hon Sir George


Richards, Rod



Riddick, Graham
Tellers for the Noes:


Robathan, Andrew
Dr. Liam Fox and


Roberts, Rt Hon Sir Wyn
Mr. Simon Burns.

Question accordingly negatived.

New clause 6

PREMISES FOR THE PROVISION OF CHILD CARE

`The following section shall be inserted after section 14 of the Capital Allowances Act 1990—

"14A (1) Where a building or structure which is not an industrial building or structure is used by a person carrying on a trade for the provision of care for the children of workers employed in that trade, this Part shall apply to that building or structure as if it were an industrial building or structure.

(2) The writing down allowances within section 3 which are made to a person by reason of subsection (1) above are not to exceed £10 in aggregate for a chargeable period.

(3) In this section—`care' means any form of care or supervised activity whether or not provided on a regular basis, but excluding supervised activity provided primarily for educational purposes; `children' means person under the age of eighteen.".'.—[Ms Armstrong.]

Brought up, and read the First time.

Ms Armstrong: I beg to move, That the clause be read a Second time.
The clause has been narrowly drawn because we are trying to deal with an important issue within the confines of what the Opposition can move on a Finance Bill. I have spent many hours trying to work out a method by which the House can respond more effectively to the needs and wishes of millions of families who want to put together the patchwork of care and education which they know is essential for their children. The House has failed to address that issue effectively.
The clause deals with the narrow issue of the way in which the Government treat employers who seek to provide child care on their premises and with employers whose workplaces are not necessarily factories or industrial buildings. A growing number of employers, especially those in the service sector and shops and supermarkets, want a fair tax regime in relation to the provision of child care and workplace nurseries. Many more who employ mainly women want to provide such facilities for their employees but are unable to do so.
I admit that even if the clause were accepted and acted upon by the Government it would not fundamentally change the pattern of child care in the way that the Opposition seek to change it. Millions of families want access to high-quality, affordable child care and early years education because they know that that is essential for their children.
Children are growing up in a dangerous world. The common spaces to which children had access in my day and in which they could play are no longer available. Parents are often afraid to allow their children to play in the street or in the back lane. Whatever type of play young children are involved in, it is important that it is supervised in safe areas by people who know what they are doing. We should be able to check that those people have the proper motives and have received proper training.
The steps that need to be taken today to protect young children may not have been necessary in earlier generations. For example, children of five and under watch an average of 23 hours of television a week. Whatever the quality of the programmes, that is bound to cause concern. It frequently happens because parents do

not have the physical resources to engage their children in active learning and, rather than allow them to be in situations in which they do not know what is happening, parents sometimes stick them in front of the television. The House should not treat that as normal.
If children are to grow up able to deal with the enormous complexities of 21st century society—many of which we do not yet know—it is essential for them to get the best experiences in their early years. Children learn much more quickly when they are very young and their behaviour and experiences set patterns for later life that are difficult to change. Report after report speaks of the value of high-quality early years education and care. The House has failed to address those needs. That is why we have tabled this modest clause. It gives us the opportunity to raise these issues and to expose the incredible poverty of the Government's response to the needs of children and families.
8 pm
When my hon. Friend the Member for Peckham (Ms Harman) moved a similar clause last year, she drew attention to the changing nature of the work force. I am sorry that the Chancellor of the Exchequer is not in the House. The largest town in my constituency is Consett, where in 1980–81 the steel works closed, not to reopen. Consett had virtually an exclusively male work force at that time: hardly any women in the town worked. Now more women than men work in Consett and that has happened in an incredibly short time. It has revolutionised community activity, family life and social activity.
Work has always described family and community life in many areas of the country and that was certainly true of Consett. Life consisted of hard shifts of skilled labour in dirty jobs and that constructed a pattern of life for families. Women spent most of their lives at home caring for the children, but that has totally changed and women have had to find ways to make sure that child care and the raising of children became more than just their preserve. Some have done it gladly, some with caution. Women have had to go out to work to earn an income for the family because of the change in the nature of the jobs available.
In Consett, the jobs are no longer highly skilled and highly paid. Indeed, according to the Government's latest figures, during the past year the average wage for women in that area has actually dropped by £12 per week. Those women and many others like them throughout the country now have to go out to work to support their families, whether they like it or not. Their wage levels have been squeezed to the point where, as I said, the average wage dropped by £12 a week in one year. I find that staggering.
It is obvious that the changing pattern of employment will have an incredible effect on the need for affordable, accessible, quality child care and early years education. The need for that is glaring. It is critical for those families to have such a facility. Like it or not, many of them have had to change their family patterns—although I accept that for some it has been a positive move. Nevertheless, overall it has had a devastating effect on family life.
There is a responsibility on the Government, who made the decision to close the Consett steel works. It is telling to note that the young Minister at the Department of Trade and Industry in 1980 who received a delegation from Consett protesting about the closures was none other than the current Chancellor. One would have thought that the


right hon. and learned Gentleman would have remembered that. One would have thought that it might have clicked with him that he met with people from a town that was about to be devastated by the closure of its steel works. That tells us a great deal about the minds of Cabinet Ministers.
I use Consett merely as an example of what has happened in communities throughout the country, where family life has been radically overturned by the changing patterns of employment. We neglect the effect of that on the children at our peril. The experiences that children have in their early years literally stay with them for the rest of their lives. During the past year, there have been a number of studies—primarily from America, but also from this country—showing the value of high-quality early years education. That should surely lead the House to question how, as a priority, we can provide a pattern of child care sufficiently flexible to allow parents to make real decisions that fit in both with their employment and with what they want for their families. Their children need access to high-quality early years education and care.
In view of the amazing changes in family life brought about by changes in the pattern of employment, it is nothing short of a scandal that the House has not debated the matter regularly. Indeed, our last serious debate on the importance of early years education was on an Opposition Supply day, following the 1988 Education Select Committee report on nursery education. That is why we wanted to have this debate on the Finance Bill, even though we could table only a very restricted new clause.
We had hoped to have this debate in Committee because the Liberal Democrat party had tabled new clauses on child care. We do not support the Liberal Democrat suggestion of vouchers because we believe that the first priority for the use of public money must be to expand and develop the pattern of child care and early years education. There is no guarantee that vouchers would achieve that. They might simply ensure that those who already have access to child care take up what money is available. Nevertheless, the new clauses would have given us the opportunity of a debate, but unfortunately that did not happen.
We have not moved a new clause seeking greater extension of tax relief because, again, that is not how we want to use public money. I know from work that I did before the last election that employers are desperate to find ways to co-operate with the Government so that they can use their commitment and their money to match public sector money and expand provision. In her speech on the Finance Bill last year, my hon. Friend the Member for Peckham quoted Howard Davies of the Confederation of British Industry, who at its conference on child care said how important it was to employers.
I have met employers and I have worked with employers groups, so I know how much they want to extend partnerships which would link public sector, private sector and voluntary sector money to provide a variety of methods of delivering child care to meet the needs of families. However, the Government have chosen not to act on the enthusiasm of those employers. I recently met some employers, involved in the child care lobby, who told me how extremely disappointed they are at the Government's lack of progress in providing early years education and child care.
Last October, at the Tory party conference, the Prime Minister promised nursery education for all four-year-olds. We have heard nothing of how the Government intend to fulfil that promise—yet he said that it would be delivered before the next election. Time is beginning to run out. I know the cost, the time and the energy needed to fulfil that commitment. People will have to be sufficiently well trained to ensure that the children's experiences are of the right quality. Premises will have to be adapted.
During last week's education debate, the Government criticised the Opposition's attitude to surplus places. Surplus places and a commitment to nursery education could be brought together. The Government could really do something. They could sort out some of the problems that they talk about by bringing those two objectives together and delivering something—and, goodness knows, we all wish that they would do that.
The Prime Minister's commitment has not been followed up. I suspect that the reason is that the Government do not want local authorities to be involved. The Government's dogma is such that they want any expansion to take place purely in the private sector. That is my suspicion. I hope that I am wrong because the most effective delivery of early years child care and education will be achieved through a partnership approach, bringing together the talent and commitment of the private, public and voluntary sectors to develop the highest quality of opportunity. None of us should rely on dogma or return to it to avoid making the commitment that young people deserve.
The Government have failed to honour their commitments. The Secretary of State for Education seems to have reneged on them. She said that her Back Benchers should examine local authority education spending that was targeted at non-statutory areas—which include, of course, nursery education. By implication, she was saying that Conservative Members should attack local authorities which spend money on nursery education. She will live to regret that.
The Secretary of State made those comments because, despite severe financial difficulties, many Labour authorities have fulfilled their commitment to the youngest children and their families. They have ensured that nursery education is available. Nursery education, however, does not solve families' needs or deal with the changes that have taken place in families. For that reason, we want to give the Government the opportunity to return to their commitments, even if they do not go back as far as Baroness Thatcher's commitment in 1972, but simply go back to the Prime Minister's commitment. That will be better than nothing.
Nobody should kid himself, however, that that commitment will be sufficient to meet families' needs today and in the next century. If the House is really concerned about the chances, opportunities and quality of life of the youngest children and of children yet to be born, it will take far more seriously the issue of how we can unlock the resources and the will that we know is there to develop a child care strategy that will meet children's needs, wherever they live, and whatever their families' decisions about what will best suit them. The new clause would be just a small token effort, but it would be better than nothing. If the Government are not going to accept it, I challenge them to say what they are going to do.
Children's needs will not go away. It does not matter what class or group they are in—they have those needs. We know that the quality of child care is inherently enhanced if there is a mixture of children in classes. If child care is available only for the most disadvantaged, children are locked into a culture of disadvantage, and that is the last thing that we want. We want child care to be available much more widely than it is. The Government could make a gesture this evening. I hope that they will.
The Select Committee on Employment recently issued an important report in which it carefully considered what was happening to women and working mothers. I hope that my hon. Friend the Member for Wallasey (Ms Eagle) will catch your eye, Madam Deputy Speaker, as she was a member of that Committee. I do not propose to go into that matter any further.
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It is important that the House takes its responsibility to ensure that children grow up with the best opportunities far more seriously. We can achieve that only if we give them the opportunity to have the best early years education. We know that the more parents are involved in their children's experiences at an earlier age, the more they will be involved in their children's education as they go through life, and the more they will feel that they are part of the provision for their children throughout their lives.
We are talking not just about the under-fives, but about children's opportunities after school and during the school holidays. Schools are not necessarily always open when it is convenient for working parents. We must have a pattern of child care which meets not only providers' but families' needs. It is important that we deal with that issue. The House might have taken more positive steps in relation to that, but that is another issue, which is not before us today.
I hope that the Government will recognise that the issue cannot be resolved by a dogmatic relationship with one sector. All sectors must be involved. We are talking about the future of all children and of our communities. Dogma must not rule there.

Ms Hodge: Labour Members have tabled a small amendment. It will make a small contribution to what should be a policy of national importance. We hope that we can encourage Conservative Members to build on a previous U-turn. I think that it was in 1990 that the Government abolished the toddler tax—a tax on employer-subsidised child care. The new clause highlights other discrepancies, not so much in the tax on employer-subsidised child care, but in tax allowances that are available to employers. They need to be dealt with. I hope that Conservative Members will take the small suggestion seriously. It is in line with the stated policy and priority of the Prime Minister, which, I understand, he reinforced again this weekend.
I share with my hon. Friend the Member for Durham, North-West (Ms Armstrong) a deep concern about what is happening to early years services. The Government are leaving them in an unholy mess. In 1972, the then Secretary of State for Education made a commitment that, within 10 years, she would provide free state nursery

education for all three and four-year-olds whose parents wanted or needed it. Twenty-three years on—that is nearly a generation of children lost—the Prime Minister stated at the Conservative party conference that he would ensure that, in the lifetime of this Parliament, free nursery education would be provided for all four-year-olds—a lesser policy, but nevertheless an important move forward.
That was six months ago. Since then, all we have had is clear division among the ranks of various Ministers, aided and abetted by various advisers outside the House, who put their oar in through writing documents for policy think tanks. I am sorry that the Chief Secretary to the Treasury is not here because he demonstrated some interest in the subject. Most recently, he gave a speech saying that he would support two propositions. I could not quite work out which he wanted most. First, he wanted vouchers for early years service and, secondly, he suggested a beauty contest involving the public and private sectors and, I suppose, non-statutory providers. They would bid for resources to build on a service that is so essential to the country as a whole.
Such suggestions, whether a voucher scheme or a beauty contest, seem wholly at odds with what the Secretary of State for Education has been saying recently in a number of speeches. She seems to recognise that statutorily provided nursery education is the best early years service to provide the best start for children in early, and later, life. It is interesting that she often appears to be overridden nowadays in her desire for more resources generally for schools and, more specifically, for children in their early years.
People like the Chief Secretary are driven by a bigoted loathing of anything to do with the public sector in general and by a more bigoted loathing, if that is possible, of anything to do with local authorities. Whether we have vouchers or beauty contests is irrelevant. As my hon. Friend the Member for Durham, North-West said, vouchers are a diversion. There is such paucity of provision in the United Kingdom—we have one of the lowest levels of publicly provided early years services—that to concentrate the very limited public resources on providing vouchers would mean that we could not direct them towards increasing the quantity of quality services on which we should be focusing. Such people simply reflect a loathing of the public and an applauding of the private at the expense of our young children.
What this country and what parents need and what young children deserve is proper public investment in early years services for education and child care. The Government are ambivalent about the state's role in providing such services. They do not know who should provide what for whom or how to finance it.
In some ways, I am pleased that the Minister of State is to reply because he, perhaps more than anyone else in the Treasury team, should recognise how short-sighted the short-termism of the Government's policy is. There is plenty of evidence from local authorities in the United Kingdom, but more especially from America, that any investment made in early years services for children saves public expenditure later.
The most recent American research revealed that every $1 spent on a child in the early years, especially on a child from a disadvantaged background, saves up to $7 later. It saves money not only on the resourcing of special needs education, but on income support because people who have adequate early years services are more likely to get


qualifications and then work. It also saves expenditure on the criminal justice system because, once in work, people are far less likely to become criminals and become a cost to society in that way.
In other words, investment in the early years pays later. I think members of all parties accept that the key to our economic success is the level of our people's skills. If so, good-quality early years provision makes sense because creating a highly qualified work force starts with investment in children in their very early years.
There is a substantial body of evidence to show that how young people perform at 16 has a direct correlation, not with their economic background, but with how they performed at seven. Their performance at that age can influence GCSE results by as much as 25 per cent. We also know that how children perform at seven has a direct correlation, not with their socio-economic background, but with whether they enjoyed pre-school education and care.
Investment in pre-school education and care means better results at seven and at 16 and a better equipped work force who will contribute to the health of the economy in the adult world. I hope that the Minister of State will take that on board. It makes sense for the Government to spend a little money. The new clause would involve a very small sum that would contribute to an increase in early years services of good quality, an issue to which I shall return a little later.
The provision of early years services is especially important for women in the work force. Today, about 600,000 more mothers go to work than in 1984, and more than half of mothers with children under five are part of the work force. Only 10, 15 or 20 years ago, they used to depend on members of the informal family network to assist with child care. That dependency has slipped, and as many as 80 per cent. of working mothers with children under five may look for formal child care arrangements. The Government have completely failed to meet the needs of working parents and their children, but we know that to meet them would make not only social but economic sense.
What has happened as working mothers have sought child care solutions? Increasingly, their child care needs are being met by the private sector. In the past few years, the greatest growth in the provision of child care has been among child minders and independent registered nurseries. They accounted for 86 per cent. of the growth in day care services in England between 1982 and 1992. That contrasts with the number of nursery places, which has risen by only 30 per cent. In other words, 86 per cent. of places are provided in the private sector and only 30 per cent. in the public sector.
The Government would no doubt applaud that, but the truth is that much of that provision is part time and of very poor educational quality. I know because I have visited several such places in the past few months. We often hear Ministers and Government spokespeople say that 90 per cent. of children have a pre-school place of some kind. That may be true, but too often the reality is that children are cared for part time in an extremely poor physical environment where there is absolutely no educational focus to their activities. It is child care on the cheap, not quality nursery education which gives future generations a better start in life.
Despite the increase in private sector provision, much of which is of a doubtful standard, the supply has not matched the increasing demand from working women. As many as 19 per cent. of children have lone parents. These parents cannot afford private nurseries or child minders if some form of local authority or other subsidised provision is not available. Even with vouchers, how would the children of such parents have access to quality provision? If we want those children to break out of the cycle of deprivation into which they are often locked, quality early years provision is the key. It is vital if we are to ensure that they have a chance of a better future.
The Government's figures show that, of the 19 per cent. of lone parents with children under five, as many as 90 per cent. want to go back to work, but they have no access to suitable child care that would enable them to do so. Why should parents in this country have to seek the cheapest or the only available option, especially as employer-based provision remains so patchy?
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We should also not lose sight of the fact that we spend a lot of money—although perhaps not enough—on training, but employees with valuable skills are lost to the work force because we do not make effective facilities available for women so that they can return to work after they have had a child. That is a criminal waste of the parent's talent, skill and experience. Let us not forget the small and medium-sized businesses, which are often less able to provide independent child care and, therefore, find it difficult to compete for skilled staff.
Every other European country apart from the United Kingdom recognises the importance of the early years services of child care and education by putting in much more publicly funded provision. They see that it makes an important social contribution to the well-being of the community and an important business contribution to the well-being of our society. In Britain, we lag behind our competitors as usual. As a country, we have no national strategy, but that is what we desperately require so that we can have accessible, available and affordable child care services for all our young children before they go to school.
Why have the Government done so little so late, especially in the area with which our new clause deals, which is to encourage employers to invest in provision? The answer lies in their lack of commitment and ambivalence towards those early years services.
Before the debate, I tried again to look for the figures so that I could form some idea of how much we provide as a nation. Anyone who has delved into the matter—I have asked a number of parliamentary questions about it—finds it impossible to get adequate information, even for how much we spend on public early years services and how many places are provided. The Departments of Health and for Education each calculate the statistics on a separate basis—one talks of pupils and the other of places, which is a further sign of the lack of a coherent child care strategy. Opposition Members believe that such a strategy is key if we are to move forward in this important area of public policy.
There is also much double counting in the Government's figures of children who could attend both a playgroup and a nursery class in the same day, which massages the statistics. That is terrible provision. Imagine a little child with a lone parent who has to go from her


parent to the child minder in the morning, then to the playgroup, back to the child minder, to a nursery class in the afternoon, back to the child minder and finally home at night. Is that the good start that we want to give children in their early years? Is that the sort of start that they deserve if they are to develop their full potential?
In Britain, child care is a lottery. It depends where one lives, on one's occupation and on whether one's employer provides anything. Another reality is that most parents have little or no choice of the type of service that they use.
One Labour party objective that lies behind the new clause is that we want to work towards employer-based child care being a realistic choice for working parents—a choice that is based firmly in the context of a strategic and co-ordinated national child care strategy. To achieve that, we must get rid of the existing anomalies in tax treatment that the new clause highlights.
I shall outline the anomalies and ask the Minister of State whether he believes that they make sense. The 1990 capital allowance tax distinguishes between capital expenditure on plant and equipment, on which all employers can claim capital allowances, and capital expenditure on buildings. That distinction means that one can claim capital allowances against corporation tax on any expenditure on nursery equipment, but expenditure on nursery space in offices and shops—the two categories with which we are concerned—is not allowable.
Nurseries that are attached to warehouses and factories qualify for an allowance, but those attached to other buildings such as offices and shops do not, yet where are women with young children most likely to work? In offices and shops. How daft and inappropriate. As a result, employers based in shops and offices who want to provide workplace nursery facilities are treated less favourably than those based in factories. Where does that leave the Government's interest in private funding for child care to promote diversity and choice, which we all favour?
The one exception is for company sports and recreational clubs, which receive an allowance even when they are attached to offices and shops. Why should sports facilities incur benefits that are unavailable to nurseries? What does that say about any professed commitment on the Government's part to take early years services seriously?
New clause 6 has the support of Employers for Childcare. Obviously, employers have an interest in producing a future generation of highly literate and numerate children to provide a well-educated and well-motivated work force later in life. Employers for Childcare has said that
the current tax policy is inconsistent. Many forms of child care are not tax exempt, thus affecting employers' ability to offer parents a genuine choice.
Our new clause would end that inconsistency by extending the industrial buildings allowance to all companies that invest in workplace nurseries, whether alone or jointly with local authorities. That will provide an incentive to employers to construct their own workplace nurseries, or to enter into partnership with local authorities to extend their provision. That is the road that we must go down if we are to offer parents genuine choice.
Labour Members realise that workplace nurseries should supplement and not replace other services that are provided locally. As has been said, partnership with employers is important. Central Government have a leadership role to play in enabling local authorities to develop a mix of provision based on the needs of children and their carers in their locality.
In conclusion, if we in Britain are to achieve the level of provision that is available in most other European countries, the Government must go beyond merely removing a punitive tax on workplace child care provision. We require a comprehensive child care strategy, together with the funds and the political will to put it into action. New clause 6 is a step in the right direction.

Ms Angela Eagle: I support new clause 6, which would introduce tax relief for premises used to provide workplace nurseries. As has been said, that is only one aspect of child care provision and it is one that can properly be debated in a Finance Bill. Opposition Members would agree that workplace child care is appropriate only in some instances. We are not trying to make a case for monolithic workplace provision, but believe that, at the least, Government should encourage its provision, as new clause 6 would, by making it clear to employers that the Government expect that, if they are interested, it should be their duty to provide child care for their employees.
The pattern of employment for women has changed profoundly and permanently, but the Government have been extremely slow to recognise that fact. To date, the fiscal and legislative framework within which we all live has failed to adapt to that significant and profound change. Women are at work despite social policy, Government legislation and the Government's response to change rather than because of it. We could do much to improve women's ability to work, have careers and provide for themselves and their families. As my hon. Friends were quick to point out, the result of making such provision would be that everybody would gain: women at work; children in their early years; and society. The economic efficiency of spending on that provision is proven.
On 15 February, the Employment Select Committee issued its "Mothers in Employment" report, the first report of this Session. Given the Government's record on this matter, the fact that it was unanimous and signed by all Conservative members of the Committee deserves particular attention as it contains a number of far-reaching proposals that would help women with children who work or wish to work.
The Committee found that, between 1984 and 1994, economically active women as a proportion of the whole rose from 66 per cent. to 71 per cent. The trend of those women who have children was even more marked, which suggests that social policy should shift to accommodate them. In 1984, 55 per cent. of those with children were economically active, but in 1994 the figure had risen to 64 per cent.
Some women need particular support and the "Mothers in Employment" report was conscious of the plight of lone parents, 90 per cent. of whom are women. Lone parents formed the only group of women in which, over the same period, the percentage of those who were economically active fell. In 1981, 45 per cent. of lone parents were economically active whereas the figure now is 39 per cent.


Lone parents are thus being trapped in a life on benefit, unable to work for a series of complex reasons with which I shall not detain the House tonight. However, that points to the fact that lone parents need a special strategy to help them back into the work force. As the Committee studied that issue, it became abundantly clear that high-quality, affordable child care must be available because the provision of child care is the key to allowing many women to work.
Although the report deals with other key issues such as maternity pay, family leave and paternity leave, I shall comment purely on aspects relevant to the new clause. The Government should provide various types of help to encourage employers to make provision for their employees and to create more state provision.
The Committee made a number of recommendations. Child care helps not only women and employers but the development of our children. The report's 13th recommendation is about tax relief on workplace nurseries and concludes that the current restriction on tax relief to workplace nurseries is not effective. It states:
The Committee recommends that the tax relief currently available to employers on workplace nurseries be extended to cover all forms of employer-assisted childcare in order to provide the necessary flexibility to suit a greater variety of circumstances.
Our modest little new clause would be one aspect of that.
The Committee also realised that Britain's response to the profound change in the nature of the work force and the massive move by women out of the home and into the work force needs a proper strategic response. The report states:
We recommend that the Government work to increase the availability and quality of childcare and to reduce its cost throughout the country by the formulation and implementation of a national strategy for childcare.
As other hon. Friends pointed out tonight, that is long overdue.
Other hon. Members have referred to the Prime Minister's oft-quoted pledge at last year's Conservative party conference. The Committee welcomed that pledge and recommended
that the Government now take action to implement the Prime Minister's pledge.
We look forward, at long last, to some action in that area because, for women who work, nursery education is as important as early-years education and child care.
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The Committee recognised the trend that many women now return to work much earlier after their child's birth because, most often, the household relies on their earnings. We must ensure that appropriate, not informal, child care is available so that those women can return to work.
We also want the House to put its own house in order and create a reasonable system of child care for the many women who work in this place. We suggest that the House of Commons Commission act as soon as possible to establish a suitable child care scheme for all those who work in the House of Commons. It is not adequate to pontificate and tell other people what they should do while failing to make such provision ourselves. This place should lead in that respect, not embarrassingly trail behind what goes on in some more enlightened areas of the economy.
The report mentions the totally unacceptable poverty trap that exists for mothers and some fathers who receive means-tested benefits, which often makes work uneconomic for them. It recommends
a review of the benefit system with the aim of removing this poverty trap.
The provision of child care at an affordable price would open up the world of work to people with caring responsibilities, including those responsible for caring for elderly and disabled people. Such provision can often pay for itself because it encourages people to become economically active when it may not have been practically possible before. Thus we reduce benefit bills and make people generally happier because they contribute to our economy. We cannot understand why the Government have not recognised the logic of that long ago.
We would welcome the Government's recognition that employers should at least be tipped the wink that they approve of their providing workplace nurseries and seeking different and appropriate ways to provide child care support for their employees. We want the Government to start making those noises.
The report contains far-reaching recommendations. The Committee was disappointed that, although on its publication it was welcomed widely by such organisations as Women into Business, the Equal Opportunities Commission and, as the Minister might expect, many trade unions, who campaigned long and hard on those issues, the Department of Employment instantly dismissed it. We hope that, at least, those on the Treasury Bench will take a more far-sighted view of the economical realities and the savings that can be made, and will look more kindly on the report's recommendations, which may mark a milestone in the battle to provide a decent, appropriate child care system for working women.
Women will not go back into the family. They now wish to take their rightful place in the economic and social life of our country. They wish this Parliament of all Parliaments to recognise at long last the social changes that have occurred, to legislate to enable women to make that move permanently and to recognise the pattern of their lives in legislation. I hope that, in responding to this modest proposal tonight, the Minister will show that the Government are listening and say that we can expect some progress soon.

Mr. Malcolm Chisholm: I support new clause 6, which represents a small piece in the large jigsaw of a national child care strategy that is urgently required. Small though it is, we would like answers to the questions put today, which were also asked last year in a similar debate.
Why should the capital allowance be available for certain types of building, but not for others, particularly, as it happens, buildings where women are likely to work? Why are the allowances available for sports pavilions and sports facilities in any kind of building, but not for nurseries? That is even more bizarre. We know that the Prime Minister feels strongly about team sports, but why does he not feel as strongly about choice of affordable child care for everyone who wants it?
The key issue is the supply of affordable child care. The Government's only initiative, the after-school care initiative, is okay as far as it goes, but it will end this year. A recent report by the Kids Club Network says that


1,000 after-school clubs will close if that initiative is not continued. Over and above that is the question of affordability. If continuing financial help is not offered to those clubs, many people will be unable to afford to pay for them.
On the demand side, the Government may talk about the child care disregard for family credit and other benefits, but welcome as that disregard has been, it has many problems. For example, it still does not cover the necessary costs; for some reason it stops when a child reaches the age of 11 and it operates per family rather than per child. Many other problems are associated with it, not least for those on maximum family credit, who receive no help. The use of that disregard must be developed extensively.
Some Conservative Back Benchers supported the report from the all-party Select Committee on Employment. I commend my hon. Friend the Member for Wallasey (Ms Eagle) for the key role that she played in producing that report. The Government would do well to consider many of the Committee's recommendations.
The Government must soon present a report to the European Commission on their implementation of the European child care recommendation, which deals with services, leave arrangements, family-friendly work practices and men and women sharing family responsibilities. The Government have little to put in their report to the Commission, so I suggest that they implement quickly some of the recommendations in the Select Committee's report. The bit of paper that they must fill in would then be slightly bigger than it is now.
The Government should also consider what many Labour local authorities have done, because they have shown the way. I should just like to mention my local authority of Lothian, which provides a nursery place for all four-year-olds and has guaranteed a nursery place for all three-year-olds as part of its election manifesto for Thursday. Lothian is already providing for 68 per cent. of three and four-year-olds in its nurseries, which is way above the United Kingdom average of 40 per cent. and the Scottish average of 37 per cent. Despite the cuts imposed by the Government, Lothian has not cut its nursery school budget. It must be commended for that. It has appreciated the importance of nursery school education. Its policy for extended nurseries will also be developed once it has won the election on Thursday.
Lothian and the Labour local authorities of Edinburgh have put £450,000 into a child care centre, which is about to be built in my constituency. We know that existing need is still not being met, because more resources must be provided for nursery education from central Government. The nursery education provided is excellent, but it is not flexible enough to meet the needs of working parents.

Mr. Deputy Speaker (Mr. Michael Morris): Order. This is not an election platform, but a debate on the provision of child care.

Mr. Chisholm: We all know about the desperate need for child care from talking to our constituents. I do not think that I am allowed to mention the local elections, but I have been talking to a lot of people around the doors in the past few days. It is absolutely remarkable how many

times the issue of child care came up, unsolicited by a politician. It is the great under-recognised issue of politics.
The stories I have heard are all the same. One woman with three children told me how there is nothing in her area for children under three. She wanted to work, but could not do so because of the lack of child care. Another woman had a good job, but her marriage broke up and she had to give it up because there were no care facilities for her children.
The problems associated with lack of child care facilities are relayed to us all the time. The Government should recognise that demand, because such facilities are necessary for parents—most frequently for women. Although I do not have time to talk about it now, child care is also necessary for children. I also agree with my hon. Friend the Member for Barking (Ms Hodge) that the quality of child care is extremely important. As many reports have shown, the provision of child care is also important and necessary for the economy.
It is time that the Government took that issue on board and offered us a child care strategy instead of the occasional inadequate policy.

Mr. Nelson: This has been a commendable, albeit brief, debate. I hope to demonstrate both qualities in my response to it.
I want to assure all hon. Members who took part in the debate that I listened carefully to all their contributions. The Government will reflect on what they said. I was struck by what the hon. Members for Durham, North-West (Ms Armstrong), for Barking (Ms Hodge) and for Wallasey (Ms Eagle) said about quality child care. They are right that not only the quantity but the flexibility and quality of education at all levels, particularly at pre-school age, is important. That is not the subject of contention on either side of the House. We should not simply throw money at a problem or extend facilities without regard to quality. The importance of quality has been an extremely significant theme of the debate.
The new clause seeks to extend industrial buildings allowances to buildings that do not qualify for that relief, but which are used for child care purposes. The clause restricts the allowances available to £10 for each chargeable period so that, in cash terms, a person can save between £2 and £4 a year depending on his marginal rate of tax. That is probably less than the cost of making a claim. That is not, presumably, a serious proposition from the Opposition, as it would be virtually worthless to business.
Under our current legislation, most day-to-day expenditure incurred by employers in the provision of child care facilities is already given full and immediate relief. That includes money spent on running costs such as staff wages, professional supervision and any incidental expenditure. Much of the capital expenditure by employers will already qualify for capital allowances, as was mentioned by the hon. Member for Barking.
The new clause would extend the scope of capital allowances. It is presumably aimed at facilities within shops, offices and other buildings. They do not generally qualify for relief on the footing that such buildings tend not to depreciate, at least over the medium to long term. An extension of capital allowances for child care facilities would therefore run counter to our policy of keeping to a minimum the number of special reliefs within the tax


system. It might also open the door to claims for special treatment for other types of currently non-allowable capital expenditure.
The hon. Member for Durham, North-West asked about the Prime Minister's commitment to universal infant education provision. The Prime Minister gave that commitment and it remains our policy to meet it. No specific date relating to the time of the next election was mentioned regarding the implementation of that commitment, but we remain pledged to it. A good deal of progress has already been made.
I note what the hon. Member for Barking said about child care expenditure being an investment. That does not, of course, mean that it does not have an immediate and substantial cash flow cost to the Exchequer and the taxpayer. We are already spending a good deal of money on child care. The hon. Lady said that it is difficult to get the figures for total provision and I rather agree with her. I hope that she will continue to ask parliamentary questions about that. A lot of child care provision is made in the form of tax relief, which is a Treasury matter and in the form of Department for Education grants and expenditure. The Ministry of Defence spends money on child care and a variety of other Departments make allowances and provisions. It is therefore important to tie them all together. I think that the totality will be a good deal more substantial than the hon. Lady may suspect.
The hon. Member for Barking says that the Government do not have a policy in that respect. We certainly do. We are committed to encouraging the expansion of provision for rising fives and for three-year-olds. However, I disagree with her about part-time education. All the studies appear to show that, although full-time education for four to five-year-olds is extremely worth while—we are responsive to that—part-time education is more beneficial for three to four-year-olds. That does not undermine the thrust of much of what the hon. Lady said.
The hon. Member for Wallasey, a distinguished member of the Select Committee on Employment, referred to the Committee's report, which has been published. I can tell her that officials are considering that report. The matter will be brought before Ministers early next month, but the Committee's recommendations have a substantial price tag. The key recommendations to extend statutory maternity rights, introduce statutory paternity and family leave arrangements and extend tax relief currently available to workplace nurseries to cover all forms of employer-assisted child care are substantial, so we must consider those carefully.
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The hon. Member for Wallasey will be aware that our right hon. Friend and colleague the Member for Berwick-upon-Tweed (Mr. Beith) recently made an announcement on behalf of the House of Commons Commission about the voucher scheme, which will take effect, I believe, from the beginning of this month.
The hon. Member for Edinburgh, Leith (Mr. Chisholm) asked why capital allowances were available for some but not all types of property. I think that I swept that point up earlier.
In conclusion, I shall say a brief word about the range of provision. I hope to provide some reassurance to hon. Members on both sides of the House that the Government take very seriously provision for the education and care of nursery children.
Employers currently obtain tax relief on direct provision of child care on the premises. They obtain child care revenue cost as an immediate deduction, 25 per cent. capital allowances on equipment and 4 per cent. capital allowances on child care buildings and structures if those are on industrial premises. Incidentally, in the small minority of cases where they are in enterprise zones, they qualify for 100 per cent. relief. There is also tax relief for other child care payments. Employers receive immediate relief on payments direct to employees or to third parties providing child care for employees.
Employers' cash payments are taxable in the normal way, as are payments made by the employer to defray the employee's pecuniary liability. However, the 1990 scheme that was introduced, the workplace scheme, has been extremely successful.
The out-of-school initiative by the Department of Employment will cost about £45 million over three years. The child care disregard, which was referred to by the hon. Member for Leith, amounts to about £60 million. The Department of Health is paying £1.3 million a year in grant aid to 10 national voluntary organisations. There is a small grant scheme giving capital grants to local groups. The Government and local authorities are giving £10 million to pre-school playgroup associations, in addition to which about £90 million of parents' contribution adds up to a significant provision.
Finally, workplace schemes, which allow the benefit in kind of the provision of a workplace scheme not to be taxable, have now encouraged the provision of about 500 schemes. All those amount to well in excess of £100 million of Government support in that area, which has given rise to a profusion of new facilities. We intend to continue to provide those facilities and to build on them, as we have done in recent years.
The Government have a very creditable record and a very clear policy on the matter. I am afraid that the new clause would do nothing at all to add to that in practice, and appears to demonstrate that the Opposition once again have a good idea but then limit it without putting a price tag on it. Once again, that is uncosted idealism, but this is not a no-cost new clause and I cannot commend it to the House.

Question put, That the clause be read a Second time:—

The House divided: Ayes 240, Noes 276.

Division No. 125]
[9.02 pm


AYES


Abbott, Ms Diane
Barron, Kevin


Adams, Mrs Irene
Battle, John


Ainger, Nick
Bayley, Hugh


Ainsworth, Robert (Cov'try NE)
Beckett, Rt Hon Margaret


Allen, Graham
Beith, Rt Hon A J


Alton, David
Bell, Stuart


Anderson, Donald (Swansea E)
Benn, Rt Hon Tony


Anderson, Ms Janet (Ros'dale)
Bennett, Andrew F


Armstrong, Hilary
Benton, Joe


Ashdown, Rt Hon Paddy
Bermingham, Gerald


Ashton, Joe
Berry, Roger


Austin-Walker, John
Betts, Clive


Banks, Tony (Newham NW)
Blunkett, David






Boateng, Paul
Hinchliffe, David


Bradley, Keith
Hodge, Margaret


Bray, Dr Jeremy
Hoey, Kate


Brown, Gordon (Dunfermline E)
Home Robertson, John


Brown, N (N'c'tle upon Tyne E)
Hoon, Geoffrey


Burden, Richard
Howells, Dr. Kim (Pontypridd)


Byers, Stephen
Hoyle, Doug


Callaghan, Jim
Hughes, Robert (Aberdeen N)


Campbell, Mrs Anne (C'bridge)
Hughes, Roy (Newport E)


Campbell, Menzies (Fife NE)
Hughes, Simon (Southwark)


Campbell-Savours, D N
Hutton, John


Canavan, Dennis
Illsley, Eric


Cann, Jamie
Jackson, Glenda (H'stead)


Chidgey, David
Jackson, Helen (Shefld, H)


Chisholm, Malcolm
Jamieson, David


Church, Judith
Janner, Greville


Clapham, Michael
Jones, Barry (Alyn and D'side)


Clark, Dr David (South Shields)
Jones, leuan Wyn (Ynys Mon)


Clarke, Eric (Midlothian)
Jones, Jon Owen (Cardiff C)


Clarke, Tom (Monklands W)
Jones, Lynne (B'ham S O)


Clelland, David
Jones, Martyn (Clwyd, SW)


Clwyd, Mrs Ann
Jones, Nigel (Cheltenham)


Coffey, Ann
Jowell, Tessa


Cook, Frank (Stockton N)
Kaufman, Rt Hon Gerald


Cook, Robin (Livingston)
Keen, Alan


Corbett, Robin
Kennedy, Jane (Lpool Brdgn)


Corston, Jean
Khabra, Piara S


Cunliffe, Lawrence
Kilfoyle, Peter


Cunningham, Jim (Covy SE)
Lestor, Joan (Eccles)


Dalyell, Tarn
Lewis, Terry


Darling, Alistair
Liddell, Mrs Helen


Davidson, Ian
Litherland, Robert


Davies, Bryan (Oldham C'tral)
Lloyd, Tony (Stretford)


Davies, Rt Hon Denzil (Llanelli)
Llwyd, Elfyn


Davies, Ron (Caerphilly)
Lynne, Ms Liz


Denham, John
McAllion, John


Dewar, Donald
McAvoy, Thomas


Dixon, Don
McCartney, Ian


Dobson, Frank
McCrea, The Reverend William


Donohoe, Brian H
Macdonald, Calum


Dowd, Jim
McFall, John


Dunnachie, Jimmy
McKelvey, William


Dunwoody, Mrs Gwyneth
Mackinlay, Andrew


Eagle, Ms Angela
Maclennan, Robert


Etherington, Bill
McMaster, Gordon


Ewing, Mrs Margaret
MacShane, Denis


Field, Frank (Birkenhead)
McWilliam, John


Fisher, Mark
Madden, Max


Flynn, Paul
Maddock, Diana


Foster, Rt Hon Derek
Mahon, Alice


Foster, Don (Bath)
Mandelson, Peter


Fraser, John
Marek, Dr John


Fyfe, Maria

Marshall, David (Shettleston)


Galloway, George
Marshall, Jim (Leicester, S)


Gapes, Mike
Martin, Michael J (Springburn)


Garrett, John
Martlew, Eric


George, Bruce
Maxton, John


Gerrard, Neil
Meale, Alan


Gilbert, Rt Hon Dr John
Michael, Alun


Godman, Dr Norman A
Michie, Bill (Sheffield Heeley)


Godsiff, Roger
Michie, Mrs Ray (Argyll & Bute)


Golding, Mrs Llin
Milburn, Alan


Gordon, Mildred
Miller, Andrew


Graham, Thomas
Moonie, Dr Lewis


Grant, Bernie (Tottenham)
Morgan, Rhodri


Griffiths, Win (Bridgend)
Moriey, Elliot


Grocott, Bruce
Morris, Rt Hon Alfred (Wy'nshawe)


Gunnell, John
Morris, Estelle (B'ham Yardley)


Hain, Peter
Morris, Rt Hon John (Aberavon)


Hall, Mike
Mowlam, Marjorie


Hanson, David
Mullin, Chris


Harvey, Nick
Murphy, Paul


Hattersley, Rt Hon Roy
Oakes, Rt Hon Gordon


Henderson, Doug
O'Brien, Mike (N W'kshire)


Heppell, John
O'Brien, William (Normanton)


Hill, Keith (Streatham)
O'Hara, Edward





O'Neill, Martin
Snape, Peter


Parry, Robert
Soley, Clive


Pearson, Ian
Spellar, John


Pickthall, Colin
Steel, Rt Hon Sir David


Pike, Peter L
Steinberg, Gerry


Pope, Greg
Stevenson, George


Powell, Ray (Ogmore)
Stott, Roger


Prentice, Gordon (Pendle)
Strang, Dr. Gavin


Prescott, Rt Hon John
Straw, Jack


Primarolo, Dawn
Sutcliffe, Gerry


Purchase, Ken
Taylor, Mrs Ann (Dewsbury)


Quin, Ms Joyce
Taylor, Matthew (Truro)


Radice, Giles
Timms, Stephen


Raynsford, Nick
Tipping, Paddy


Redmond, Martin
Turner, Dennis


Reid, Dr John
Tyler, Paul


Robinson, Geoffrey (Co'try NW)
Vaz, Keith


Roche, Mrs Barbara
Walley, Joan


Rogers, Allan
Wardell, Gareth (Gower)


Rooker, Jeff
Wareing, Robert N


Rooney, Terry
Wicks, Malcolm


Ross, Ernie (Dundee W)
Wigley, Dafydd


Rowlands, Ted
Williams, Rt Hon Alan (SW'n W)


Ruddock, Joan
Williams, Alan W (Carmarthen)


Sedgemore, Brian
Winnick, David


Sheerman, Barry
Wise, Audrey


Sheldon, Rt Hon Robert
Worthington, Tony


Shore, Rt Hon Peter
Wray, Jimmy


Short, Clare
Young, David (Bolton SE)


Skinner, Dennis



Smith, Andrew (Oxford E)
Tellers for the Ayes:


Smith, Chris (Islton S & F'sbury)
Mr. John Cummings and


Smith, Llew (Blaenau Gwent)
Mr. George Mudie




NOES


Ainsworth, Peter (East Surrey)
Carrington, Matthew


Aitken, Rt Hon Jonathan
Carttiss, Michael


Alexander, Richard
Channon, Rt Hon Paul


Alison, Rt Hon Michael (Selby)
Chapman, Sydney


Ancram, Michael
Clappison, James


Arbuthnot, James
Clark, Dr Michael (Rochford)


Arnold, Jacques (Gravesham)
Clarke, Rt Hon Kenneth (Ru'clif)


Arnold, Sir Thomas (Hazel Grv)
Clifton-Brown, Geoffrey


Ashby, David
Coe, Sebastian


Atkins, Robert
Colvin, Michael


Atkinson, Peter (Hexham)
Congdon, David


Baker, Nicholas (North Dorset)
Conway, Derek


Baldry, Tony
Coombs, Anthony (Wyre For'st)


Banks, Matthew (Southport)
Coombs, Simon (Swindon)


Banks, Robert (Harrogate)
Cope, Rt Hon Sir John


Bates, Michael
Cormack, Sir Patrick


Batiste, Spencer
Couchman, James


Bellingham, Henry
Cran, James


Bendall, Vivian
Currie, Mrs Edwina (S D'by'ire)


Beresford, Sir Paul
Curry, David (Skipton & Ripon)


Biffen, Rt Hon John
Davies, Quentin (Stamford)


Bonsor, Sir Nicholas
Davis, David (Boothferry)


Booth, Hartley
Day, Stephen


Boswell, Tim
Devlin, Tim


Bottomley, Peter (Eltham)
Douglas-Hamilton, Lord James


Bottomley, Rt Hon Virginia
Dover, Den


Bowden, Sir Andrew
Duncan, Alan


Bowis, John
Duncan-Smith, Iain


Boyson, Rt Hon Sir Rhodes
Dunn, Bob


Brandreth, Gyles
Durant, Sir Anthony


Brazier, Julian
Eggar, Rt Hon Tim


Bright, Sir Graham
Elletson, Harold


Brooke, Rt Hon Peter
Emery, Rt Hon Sir Peter


Brown, M (Brigg & Cl'thorpes)
Evans, Jonathan (Brecon)


Browning, Mrs Angela
Evans, Nigel (Ribble Valley)


Bruce, Ian (Dorset)
Evans, Roger (Monmouth)


Budgen, Nicholas
Evennett, David


Burt, Alistair
Faber, David


Butler, Peter
Fabricant, Michael


Carlisle, John (Luton North)
Field, Barry (Isle of Wight)


Carlisle, Sir Kenneth (Lincoln)
Fishburn, Dudley






Forman, Nigel
Lyell, Rt Hon Sir Nicholas


Forsyth, Rt Hon Michael (Stirling)
MacGregor, Rt Hon John


Forth, Eric
MacKay, Andrew


Fowler, Rt Hon Sir Norman
Maclean, David


Fox, Sir Marcus (Shipley)
McLoughlin, Patrick


Freeman, Rt Hon Roger
McNair-Wilson, Sir Patrick


French, Douglas
Maitland, Lady Olga


Fry, Sir Peter
Malone, Gerald


Gale, Roger
Mans, Keith


Gallie, Phil
Marland, Paul


Gardiner, Sir George
Marshall, John (Hendon S)


Garel-Jones, Rt Hon Tristan
Martin, David (Portsmouth S)


Garnier, Edward
Mates, Michael


Gill, Christopher
Mellor, Rt Hon David


Gillan, Cheryl
Merchant, Piers


Goodson-Wickes, Dr Charles
Mills, Iain


Gorman, Mrs Teresa
Mitchell, Andrew (Gedling)


Gorst, Sir John
Mitchell, Sir David (NW Hants)


Grant, Sir A (SW Cambs)
Moate, Sir Roger


Greenway, Harry (Ealing N)
Monro, Sir Hector


Greenway, John (Ryedale)
Montgomery, Sir Fergus


Griffiths, Peter (Portsmouth, N)
Moss, Malcolm


Gummer, Rt Hon John Selwyn
Needham, Rt Hon Richard


Hague, William
Nelson, Anthony


Hamilton, Rt Hon Sir Archibald
Neubert, Sir Michael


Hamilton, Neil (Tatton)
Newton, Rt Hon Tony


Hampson, Dr Keith
Nicholls, Patrick


Hanley, Rt Hon Jeremy
Nicholson, David (Taunton)


Hannam, Sir John
Nicholson, Emma (Devon West)


Haselhurst, Alan
Norris, Steve


Hawkins, Nick
Onslow, Rt Hon Sir Cranley


Hawksley, Warren
Oppenheim, Phillip


Hayes, Jerry
Ottaway, Richard


Heald, Oliver
Page, Richard


Heathcoat-Amory, David
Paice, James


Hendry, Charles
Patnick, Sir Irvine


Higgins, Rt Hon Sir Terence
Patten, Rt Hon John


Hill, James (Southampton Test)
Pattie, Rt Hon Sir Geoffrey


Horam, John
Peacock, Mrs Elizabeth


Hordern, Rt Hon Sir Peter
Pickles, Eric


Howard, Rt Hon Michael
Porter, Barry (Wirral S)


Howarth, Alan (Strat'rd-on-A)
Porter, David (Waveney)


Howell, Rt Hon David (G'dford)
Portillo, Rt Hon Michael


Howell, Sir Ralph (N Norfolk)
Powell, William (Corby)


Hughes, Robert G (Harrow W)
Rathbone, Tim


Hunt, Rt Hon David (Wirral W)
Redwood, Rt Hon John


Hunt, Sir John (Ravensbourne)
Renton, Rt Hon Tim


Hunter, Andrew
Richards, Rod


Jack, Michael
Riddick, Graham


Jackson, Robert (Wantage)
Robathan, Andrew


Jenkin, Bernard
Roberts, Rt Hon Sir Wyn


Johnson Smith, Sir Geoffrey
Robertson, Raymond (Ab'd'n S)


Jones, Gwilym (Cardiff N)
Robinson, Mark (Somerton)


Jones, Robert B (W Hertfdshr)
Roe, Mrs Marion (Broxbourne)


Jopling, Rt Hon Michael
Rowe, Andrew (Mid Kent)


Kellett-Bowman, Dame Elaine
Rumbold, Rt Hon Dame Angela


Key, Robert
Sackville, Tom


King, Rt Hon Tom
Sainsbury, Rt Hon Sir Timothy


Kirkhope, Timothy
Scott, Rt Hon Sir Nicholas


Knapman, Roger
Shaw, David (Dover)


Knight, Mrs Angela (Erewash)
Shaw, Sir Giles (Pudsey)


Knight, Greg (Derby N)
Shephard, Rt Hon Gillian


Knight, Dame Jill (Bir'm E'st'n)
Shepherd, Colin (Hereford)


Knox, Sir David
Shepherd, Richard (Aldridge)


Kynoch, George (Kincardine)
Shersby, Michael


Lait, Mrs Jacqui
Sims, Roger


Lang, Rt Hon Ian
Skeet, Sir Trevor


Lawrence, Sir Ivan
Smith, Tim (Beaconsfield)


Legg, Barry
Soames, Nicholas


Lennox-Boyd, Sir Mark
Spencer, Sir Derek


Lester, Jim (Broxtowe)
Spicer, Sir James (W Dorset)


Lidington, David
Spicer, Michael (S Worcs)


Lightbown, David
Spink, Dr Robert


Lilley, Rt Hon Peter
Spring, Richard


Lloyd, Rt Hon Sir Peter (Fareham)
Sproat, Iain


Luff, Peter
Squire, Robin (Hornchurch)





Stanley, Rt Hon Sir John
Vaughan, Sir Gerard


Steen, Anthony
Waldegrave, Rt Hon William


Stephen, Michael
Walden, George


Stem, Michael
Walker, Bill (N Tayside)


Stewart, Allan
Waller, Gary


Streeter, Gary
Wardle, Charles (Bexhill)


Sumberg, David
Waterson, Nigel


Sweeney, Walter
Watts, John


Sykes, John
Wells, Bowen


Tapsell, Sir Peter
Whitney, Ray


Taylor, Ian (Esher)
Whittingdale, John


Taylor, John M (Solihull)
Widdecombe, Ann


Temple-Morris, Peter
Wiggin, Sir Jerry


Thomason, Roy
Willetts, David


Thompson, Sir Donald (C'er V)
Winterton, Mrs Ann (Congleton)


Thompson, Patrick (Norwich N)
Wolfson, Mark


Thornton, Sir Malcolm
Wood, Timothy


Thurnham, Peter
Yeo, Tim


Townsend, Cyril D (Bexl'yh'th)
Young, Rt Hon Sir George


Tracey, Richard



Tredinnick, David
Tellers for the Noes:


Trend, Michael
Dr. Liam Fox and


Twinn, Dr Ian
Mr. Simon Burns.

Question accordingly negatived.

New clause 16

REBATE MECHANISM FOR IRRECOVERABLE VAT FOR CHARITIES

'(1) The Financial Statement and Budget Report for 1995 shall include for the financial years 1996–97, 1997–98 and 1998–99, Treasury estimates of—
 (1)(a) the total amount of VAT to be collected;
(b) the total amount of VAT paid to be paid by charities on—

(i) business activities; and
(ii) non-business activities;

(c) the amount of VAT paid by charities on input tax on expenditure in pursuit of their charitable objectives which cannot be recovered.

(2) There shall also be included an estimate of the effect on the PSBR of a mechanism to rebate to charities by grants-in-aid a sum equivalent to:

(i) 25 per cent;
(ii) 40 per cent; and
(iii) 50 per cent:

of the irrecoverable VAT paid by them.'.—[Mr. Alan Howarth.]

Brought up, and read the First time.

Mr. Alan Howarth: I beg to move, That the clause be read a Second time.
The new clause would require the Government to provide information that would enable us to appreciate the scale of the problem of irrecoverable value added tax which faces charities.
We are asking charities to do more and more. For example, care in the community invites charities to play a new, more formalised and more extensive role in social provision. That is as it should be. Our aspirations for social provision are rising. We know that state agencies, crucial as they are, are insufficient. Of their nature, they tend to be broad-brush in their approach, somewhat clumsy and somewhat insensitive to the infinite variety of human need.
By contrast, charities at their best reach the parts of society that bureaucracies are unable to reach. Charities have entrepreneurial qualities, and they are cost-effective.


It is right that we are seeking to mobilise them in a partnership to enlist all the resources of generosity in our society.
There is a perversity in our fiscal system, which lies in irrecoverable VAT. Charities are being asked to provide residential homes, day centres and respite care. They are expected to demonstrate cost-effectiveness by tendering against commercial organisations and to demonstrate their effectiveness compared with local authority providers.
At the same time, local authority providers, providing the same services as charities, do not have to pay VAT. Commercial organisations can reclaim VAT, or, if they are engaged in the provision of exempt services, they can build in a profit factor to offset the cost of irrecoverable VAT. That is not possible for charities for the greater part of their activity.
The services that charities provide are mostly VAT exempt or outside the scope of VAT. They are unable to recover the VAT that they have paid on necessary supplies to enable them to deliver services. The Charities Tax Reform Group estimates that the cost of irrecoverable VAT to the charitable sector is about £335 million annually. New research by London Economics suggests that the figure may be nearer £550 million.
I shall give some examples of the burden on particular charities. Methodist Homes for the Aged found itself paying £450,000 in irrecoverable VAT. The National Society for the Prevention of Cruelty to Children paid £650,000 in a year. Help the Aged paid about £750,000. The Royal National Institute for the Blind paid £1.2 million. Some charities are losing about 10 per cent. of their income in irrecoverable VAT.
If policy is to be consistent, and if we are to provide for fair competition in the developing market for care, we must redress the balance. The solution is the establishment of a refund scheme whereby charities would be compensated through Treasury grant in aid for a set proportion of the VAT that they incurred on their non-business expenditure. I emphasise that the charities would not keep the money that came back to them as profit; they would plough it back into services.
Such a scheme works successfully in Canada, where charities are able to reclaim half the amount spent in general services tax at the end of the financial year. The Charities Tax Reform Group has been advised by the European Commission that such a scheme would be permissible within European law.
The proposal is that the scheme should apply only in relation to non-business expenditure, which would go a long way to safeguard against fraud. Such a scheme would also be flexible, enabling my right hon. and learned Friend the Chancellor to vary the proportion of irrecoverable VAT which would be rebated according to the circumstances of the economy and his judgment of what he could afford.
Such a scheme ought to be attractive to the Treasury and to my hon. Friends on the right, because they could look forward, if they wished to do so, to some substitution of charitable activity for state activity. Charities also provide excellent value for money. This scheme should also have a broader appeal; it should recommend itself to others of my hon. Friends and to the Opposition, because it would make for a cost-effective increase in social provision.
The standard objection advanced against this argument over the years is that it is Government policy to provide fiscal concessions to encourage charitable giving, and that we cannot have it both ways. Speaking as the chair of the all-party group on charities, I know that the increase over many years in tax concessions for charitable giving has been very much appreciated—at least until the March 1993 Budget.
Until that date, the cumulative value—I speak from memory, and my hon. Friend the Paymaster General will correct me if I am wrong—of tax concessions on charitable giving introduced by this Government amounted to £900 million a year. Since then, however, the Treasury has been somewhat less benign. In the March 1993 Budget, we saw the measure on advance corporation tax for charities and the introduction of VAT on domestic fuel and power. The consequence was that charities lost £100 million net in tax terms.
Alongside that fiscal setback, charities then and since have suffered from fairly tight restraints on the capacity of central and local government to make grants to them. The recession caused enormous difficulties for them in fund raising with the private sector. Charities have recovered very unevenly from the recession.
The Government's strategy of switching the emphasis from direct to indirect taxation and the prospect that my right hon. and hon. Friends hold out of progress towards a 20p basic rate of income tax challenge us to a fundamental reconsideration of the tax treatment of charities. We should not, of course, reduce the concessions for charitable giving, but we should recognise that encouragement for giving is insufficient.
There is, after all, a certain randomness. Although we should respect the wishes of donors to charities and should let them make their own judgments, we should recognise that, in terms of how social need is to be addressed, there is considerable randomness in the pattern of charitable giving. Although the great majority of charities are active, efficient and competent in what they set out to do, we cannot say that of all of them.
There is a case for a new emphasis on supporting charities that do things—charities that make social provision. It is often provision in unglamorous, unfashionable, but vitally necessary areas. My right hon. and hon. Friends ought seriously to consider how they will remedy the problem that the Government take more away in VAT from some charities that perform extremely valuable social tasks than those charities gain in concessions on charitable giving.
The Government want charities to play an important part in the pattern of social provision. Charities are strongly placed to do so. They are cost-effective. Their gearing, through their capacity to mobilise voluntary support, means that they have an enormous amount to contribute for the money that they dispose of. They are innovative.
We ought to be systematic in our encouragement and support of the charitable sector. I put it to my right hon. and hon. Friends that we need a systematic review of the tax treatment of charities and the totality of Government's policy in relation to charity, so that we can do our best to ensure that it is coherent and that charities are consistently supported.
The ways and means resolution and the money resolution that we have approved mean that it is not possible to table a new clause that would be in order


which would provide substantively for the implementation of a compensation scheme such as I have argued for. Therefore, I have tabled new clause 16, which would require the Government to supply information that would illustrate the situation and the need. It is my hope that, in researching and considering the estimates that the new clause would require, my right hon. and hon. Friends will be persuaded of the necessity of a VAT compensation scheme.

Mr. Tim Smith: In recent years, charities have had to bear an increasing burden of VAT, as my hon. Friend the Member for Stratford-on-Avon (Mr. Howarth) has said. He is right when he says that we should have a comprehensive review of their liability to pay VAT. His new clause has my full support.

Ms Primarolo: I congratulate the hon. Member for Stratford-on-Avon (Mr. Howarth) on tabling new clause 16. As he said in his closing remarks, the ways and means and money resolutions are drafted tightly, so it would be difficult, if not impossible, to table an amendment that would be in order. He was right to table a new clause asking for information to identify the scale of the difficulty experienced by charities because of irrecoverable VAT. We support the principle that we should look carefully at the impact of the increasing importance of VAT as the major element in the Government's strategy of shifting from direct to indirect taxes.
As the hon. Member for Stratford-on-Avon highlighted, charities mostly provide services which are exempt from VAT. Therefore, they are unable to recover VAT where they have paid it on purchases of necessary supplies.
The director of finance and administration of the National Children's Home has said:
The irrecoverable VAT burden of NCH in 1992/93 was £891,000.
If it had been able to use that money to finance its activities, it would have been able to open and run another 20 family centres. As has been pointed out, examples such as the Canadian tax regime, in which proportions of tax are reclaimed by charities, are worthy of consideration by the Government. It would be important that any scheme limited the recoverable VAT to non-business expenditure only.
We support the principle of the new clause. I hope that the Paymaster General will tell us that the Government are willing to look closely at the difficulties that charities are experiencing. I hope that he will tell the House how we could introduce a sensible tax regime that did not penalise the charities to the extent that they are penalised now.

Mr. Heathcoat-Amory: I pay tribute to the good work done by the charitable sector, described eloquently by my hon. Friend the Member for Stratford-on-Avon (Mr. Howarth). The Government recognise that work by, for instance, granting tax reliefs, as my hon. Friend mentioned.
A number of specific VAT reliefs are granted for charitable purchases, which save the sector about £150 million a year—perhaps one third of its potential VAT bill. The reliefs cover purchases of medical research and rescue equipment such as lifeboats, equipment for

disabled people, the construction of certain charities' buildings, and advertising to raise funds. Moreover, the sale by charities of donated goods is zero-rated, and admission to fund-raising events such as concerts is exempt. Those reliefs may be worth another £50 million. Direct tax reliefs are worth about £830 million, and exemption from business rates about £240 million.
It is clear that the charitable sector as a whole has been given a wide range of reliefs to enable it to do the good work that we expect of it. The general VAT rebate scheme outlined by my hon. Friend the Member for Stratford-on-Avon and others, which would apply to all charities, would be very expensive; it might cost a further £300 million a year—money that would either go straight on to the budget deficit or have to be found elsewhere. Moreover, such a scheme would give most benefit to bodies spending heavily on taxable goods and services, regardless of the aim of the charity or the nature of the expenditure.
Charitable status is widely granted: there are about 170,000 registered charities in the country. Both this evening and in discussions elsewhere, my hon. Friend has spoken of the importance of social provision by charities, but it would be almost impossible for us to differentiate between charities of that kind and the generality of registered charities—which include universities, providers of private medical care and public schools. We must be cautious about granting another general tax relief by way of a VAT refund scheme; the good it might do would not be particularly narrowly focused.
I now realise that the new clause was intended as a probing measure; before my hon. Friend made that clear, I was a little worried. The figures requested would be extremely difficult to obtain, certainly on a routine basis: much of the information could not be obtained from VAT returns, for the good reason that most of the activities involved are exempt from VAT or outside its scope, because the charities concerned are not registered.
Therefore, the information would have to be obtained from surveys, which would not only be administratively expensive for Customs and Excise but would impose on the charities a compliance cost that might not be altogether welcome. If my hon. Friend wishes to obtain further and better information about the sums involved, which is the requirement of the new clause, I should be happy to answer a parliamentary question.
I think that I said enough earlier to show that, although I am highly sympathetic to the aims of the clause, and genuinely acknowledge the work that is done by charities, especially in filling the gaps that must always exist in state provision and in finding new and innovative ways to respond to human needs, I must resist, without any misunderstanding, the thinking behind the proposal. We do not contemplate a general VAT refund scheme, despite the eloquence of my hon. Friend's pleadings.

Mr. Alan Howarth: With his usual astuteness, my hon. Friend has perceived that the new clause was probing. I am grateful to him for his sympathetic view of the issue. It is important, and I hope that the debate, which I am glad we have had, will encourage the Government to think systematically not only about this issue but about the totality of Government fiscal policy in relation to charities. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Madam Speaker: We now come to new clause 18. The three hon. Members who are eligible to move it are Mr. Knapman, Mr. Alexander and Mr. Rupert Allason. As they are not present, the new clause falls.

Clause 8

HYDROCARBON OIL: "ROAD VEHICLE"

Mr. Heathcoat-Amory: I beg to move amendment No. 68, in page 6, line 21, at end insert—

'Vehicles used between different parts of land

4A. A vehicle is an excepted vehicle if—

(a) it is used only for purposes relating to agriculture, horticulture or forestry,
(b) it is used on public roads only in passing between different areas of land occupied by the same person, and
(c) the distance it travels on public roads in passing between any two such areas does not exceed 1.5 kilometres.'.

Madam Speaker: With this, it will be convenient to discuss also the following: Amendment No. 91, in schedule 4, page 169, leave out lines 39 and 40.
Government amendment No. 69.

Mr. Heathcoat-Amory: We are denied an outing on amusement machine licence duty. The amendment relates to vehicle excise duty changes and it might be helpful briefly to remind hon. Members of the reasons for the changes to that duty, which are set out in schedule 4.
The existing system of VED suffers from a great many faults. It is archaic, in some cases dating back to before the second world war, and as a result it no longer concentrates special treatment and concessions on those who most merit them. It is also extremely complex. There are 132 separate classes for this type of indirect taxation. Consequently, it is bureaucratic and I am afraid that it is also prone to evasion. Therefore, we have used the Bill as an opportunity to push through major reform and restructuring of the vehicle excise duty system.
Any reform on this scale is not easy and we made a number of consequential changes after discussing the matter during earlier debate on the Bill and with the trades and associations that are affected. The system that is set out in schedule 4 addresses the faults that I have outlined and the 132 classes are reduced to fewer than a dozen. Special treatment is now concentrated on the most deserving, opportunities for evasion are closed and bureaucracy is reduced.
The amendment relates to farming, horticulture and forestry because it is obvious, especially to hon. Members with agricultural constituencies, that farm operators are frequently obliged to make short journeys between parcels of land in the same ownership. Such limited use of the public roads warrants the continued exemption from VED and entitlement to rebated fuel.
The old 6-miles-per-week exemption was bureaucratic and virtually impossible to enforce and our original intention was to abolish it. However, I said clearly in Committee that I would listen to representations from hon. Members, the National Farmers Union, the Country Landowners Association and others on whether we could design an exemption that was less bureaucratic and more

enforceable, but which would give relief, where merited, to those farm vehicles making inevitable short trips along public roads.

Ms Primarolo: I am listening carefully to the Paymaster General. Can he confirm that the proposals before us are not less restrictive than the previous 6-miles-per-week regulation, but are less bureaucratic? Is he saying that, basically, it is the same arrangement but in a less bureaucratic form?

Mr. Heathcoat-Amory: The proposal is certainly less bureaucratic because previously the farmer had to fill out a complex annual form. If he needed to divert from the route laid down in the form because, for example, of a blockage in the road, theoretically he had to write for permission to make the detour.
The proposal is also more enforceable because, instead of a system based on time and distance—6 miles per week—we have agreed to a scheme that gives exemption to vehicles used for agriculture and similar purposes where no trip on a public road between land in the same occupation exceeds 1.5 km, which is about as near to a mile as the metric system allows. To enforce that, the police officer no longer has to guess how many miles the vehicle has travelled in a week; instead, he can easily judge whether the vehicle is within 1.5 km of the nearest land in that particular ownership or occupation.
It is a different system and a slightly different category of vehicles will benefit, but the overall intention is the same. In general, it is slightly more generous than the system it replaces. Under the old system, if the limit of 6 miles per week had been used up, in theory the farmer was not entitled to any more trips on a public road. Now, he can make an unlimited number of journeys on a public road, within the overall constraint that they can be no more than 1.5 km in distance. I commend the amendment to the House.

Mr. Tyler: I want to mention the concerns that the agricultural, horticultural and forestry industries had about the original proposal, from which, to some extent, the Government have now retreated. That is welcome.
I have two questions for the Paymaster General. First, why was the original proposal ever included in the Bill? Clearly, consultation must have been absolutely minimal if the Government now have to make this major, albeit welcome, change. The only thing that I can think of that might have been the logic behind the original proposal is that Conservative Members who represent agricultural constituencies must have told the Government that such was the scale of current agricultural enterprises that they had so many private roads that the exemption was no longer necessary.
The other question is why the distance of precisely 1.5 km has been chosen. It is near a mile, but why were not the distances of 1, 1.5 or 2 miles chosen? That restriction does not seem to have any particular logic. No precedent for it exists in similar legislation from the past, or in present restrictions.
The Government's retreat is welcome. I know that all three industries will be delighted that, at long last, the Government have recognised the problem that they were creating. However, the attempt to reduce bureaucracy could still result in a number of problems. The provision on vehicles that are used only for agriculture, horticulture and forestry purposes might, for example, not catch in its


net a pick-up truck that is used for leisure purposes at weekends—not that farmers ever get any leisure time. They may find that, if a tight net were drawn, a vehicle used for leisure purposes would not be captured within the amendment and, therefore, that they would not have the exemption either from fuel or vehicle excise duty.
I hope that the system will prove simpler than that of the past, and than that which would have resulted from the original proposal. I thank the Paymaster General for listening to hon. Members on both sides of the House at an early stage in Committee. I hope that he will be able to answer those two simple points when he replies to the short debate.

Mrs. Jacqui Lait: I want to thank my hon. Friend the Paymaster General for the changes. Farmers in Hastings and Rye quickly alerted me to the difficulties with the original proposal. I know that they are pleased about not just the changes in the distance that they can drive, but the reduction in bureaucracy. Every farmer would dearly like to have fewer forms to fill in. The reduction of one will be much welcomed.

Mr. Robert Key: I ask my hon. Friend the Minister to consider new section 4A(b), which states that the vehicle should pass between
different areas of land occupied by the same person".
On many occasions, the cost of agricultural machinery is so great that farmers buy machinery jointly, or have a working arrangement to farm each other's land and share the machinery. Although those farmers meet the purposes of new section 4A(a) and (c), the lands that they farm may not technically be occupied by the same person, even though they may be only 1 or 2 km away from each other.
That is important to farmers in my constituency such as Mr. Sandell and Mr. Crook of Amesbury, who have a river and a bridge between their land. They would not benefit from the clause simply because they do not occupy each other's land.

Mrs. Margaret Ewing: I shall be extremely brief, but I want to refer to my amendment No. 91. I accept that amendment No. 68, which stands in the name of the Chancellor of the Exchequer, is a massive improvement on the original proposal. The Paymaster General has referred to his desire to reduce bureaucracy and the complexity of forms that farmers must fill out, but I do not believe that the amendment will reduce that complexity. Aspects of it will lead to various arguments being propounded as to what an agricultural vehicle is exactly.
The amendment is not particularly clear when it states:
for purposes relating to agriculture, horticulture or forestry".
Will that, for example, include a truck that is not defined as a tractor or an agricultural implement? That is one of the concerns that many farmers have about the definition of an agricultural vehicle.
Has the Paymaster General received any representations recently from the National Farmers Union for Scotland or from Forestry Enterprise on the provision allowing an unlimited number of journeys of 1.5 km? Realistically, that provision is not particularly helpful in regions such as mine, where farms or forestry may cover vast areas of land. Farms may not be especially profitable,

but they cover vast areas. I wonder whether there has been any recognition of the particular geography or topography of certain areas.
I echo the sentiments that have been expressed about co-operation between farmers which may involve moving implements from one farm to another, thereby leading to the 1.5 km provision being exceeded. It is important to clarify the issue so that we do not get into yet another muddle and in order to avoid bureaucracy. Our farmers and foresters are extremely concerned.
While there has been a general welcome for the amendment, I hope that the Paymaster General will take on board the fact that there are still reservations about it. I hope that we can be provided with a final definition.

Mr. Peter Griffiths: The Paymaster General referred to "the most deserving case"—I think that that was the phrase—being kept in the revised regulations. I wonder whether he may come to regret that phrase because, although I have no objection to the proposal to reduce the burden on those who operate vehicles for forestry or for agricultural purposes, other groups of people in an almost identical situation do not receive the same sympathetic attention.
I am thinking of, for example, plant hire companies that provide, for use in construction, vehicles which are often used on the road for only part of the time. They are faced with a great increase in tax in the Budget and, while I accept that the merits of the case for agriculture may be strong, other groups do not benefit from the subsidies received by agriculture and forestry but, as they are involved in the construction industry, face considerable difficulty in passing on the increased tax burden.

Mr. William Ross: I echo the views expressed by the hon. Members for Moray (Mrs. Ewing) and for Salisbury (Mr. Key) about co-operation among farmers. I think that the House will appreciate that the smaller the farms, the more likely there is to be such co-operation. Indeed, it is not so much common as nearly universal in Northern Ireland. I hope that the Minister will take on board the comments made a few moments ago.
I draw the House's attention to a matter which has not yet been mentioned, at least not in my hearing—the 1.5 km provision. In Northern Ireland and, no doubt, in slightly different forms throughout the United Kingdom, we have a system of renting land. In Northern Ireland it is called conacre. It involves renting land for a particular crop for one year. It is of considerable value to specialist potato growers and, to a lesser extent, to specialist grain growers and, of course, in respect of grass silage which often has to be grown at a considerable distance from where it is needed.
The periods of time during which tractors and other vehicles are used to move crops are comparatively short—in some cases, only a few days each year. As the House will know, at such times it is a question of every possible vehicle being put on the road to do the work in the shortest possible time. Crops are sometimes grown on land that is considerably further off than 1.5 km. Indeed, I should have thought that 10 km was a more reasonable distance to include in the legislation. Perhaps the Minister will take that point on board in addition to that made by


the hon. Members for Moray and for Salisbury and attend to them next year, as I do not expect that any further changes to the Bill will be made now.

Mr. Heathcoat-Amory: I was asked why the original proposal was to do away with the exemption. It was simply because it was bureaucratic and unworkable and the House should not pass or tolerate laws that are described as such. I made it clear, however, that if agricultural and similar vehicles could be exempted from vehicle excise duty in a way that overcame the problems, I would consider it. Since I said that and since we have had the meetings with the trade representatives, we have found exactly such a way and I commend it to the House.
I was asked why the amendment sets out a distance of 1.5 km. I own that I would rather have put "1 mile" in the statute, but I am advised that nowadays we are all going metric. I do not know why, but I can guess. It is certainly the case that, from 1999, our statutes have to reflect kilometres and other metric measurements, with a few exceptions that do not cover this case. I went for the nearest length equivalent to a mile and came up with 1.5 km, which is reasonably comprehensible to farmers, even though most of the farmers I know are still in the day of rods, poles and perches—if they are very modern they talk about furlongs. I am afraid that we must all go metric in due course, and so the figure in the statute will be 1.5 km.
On the argument of my hon. Friend the Member for Portsmouth, North (Mr. Griffiths) about construction vehicles, the rationale for the agricultural exemption is the low mileage on roads. Often, farmers simply have to cross a main road—they do nothing more than that—so they do not use the public highway in any real sense of the word, whereas construction vehicles and the like use public roads, which explains the difference in treatment.
I was also asked about farms that may not be in the same occupation, but use the same vehicles. Contract vehicles frequently travel quite short distances between different farms, but during a year they tend to make significant use of public roads. They would not have benefited under the old exemption of 6 miles per week and it is not right, therefore, that we should design a markedly more generous system to replace the one that we are doing away with.

Mrs. Ewing: Can the Paymaster General differentiate between a contract vehicle and one that is owned by a co-operative?

Mr. Heathcoat-Amory: Yes, but I think that the general point still applies. If a co-operative's vehicle moved frequently between different farms, it would not have benefited under the old system of 6 miles per week and, typically, would do more than the 1.5 km hops between land, even if we were to change the statute to allow such hops between farms to include movements

between land in different ownership. Obviously, we have to draw a line at some point and I think that we have done so in the right place.

Mr. Tyler: rose—

Mr. Heathcoat-Amory: The hon. Gentleman spoke earlier and I am trying to answer him, but I will be happy to listen if he has a different point.

Mr. Tyler: I want to draw the Paymaster General's attention to the words "same person" in paragraph (b) of the amendment. It is not clear to whom that applies—the same as what? In this case, it is extremely important because, as the hon. Member for Salisbury (Mr. Key) said, "same person" might mean something in the context of a co-operative. The "same person" is very difficult to define. I think that the hon. Member for Salisbury is agreeing.

Mr. Heathcoat-Amory: The use of "same person" means that it applies to a farm in the same ownership. We are exempting a farm vehicle—a tractor or whatever—when it moves from a field owned by a man or a partnership to a different field in the same ownership. If it involves a journey of less than 1.5 km, the farm vehicle will be exempt from vehicle excise duty. That is reasonably clear and I commend the measure to the House.

Amendment agreed to.

Clause 14

RATES OF DUTY

Mr. Denis MacShane: I beg to move amendment No. 83, in page 10, line 13, after 'State', insert 'or Cyprus or Malta'.
The amendment deals with the transport by air from this country to two Commonwealth nations that lie within the European geographical area: Cyprus and Malta.
Some 50 years ago, the air over Malta was full of aeroplanes—those of the Nazi Luftwaffe trying to crush that little island out of existence. Britain owes a debt to Malta and, as we celebrate VE day, the Bill provides the House with an opportunity to give the people of Malta a small present by reducing from £10 to £5 the air passenger duty that British holidaymakers must pay when they fly to Malta.
10 pm
As hon. Members may know, we have two rates of air passenger duty: £5 for the European Union and the European Economic Area; and £10 for the rest of the world. The amendment simply proposes that, as Commonwealth countries, Malta and Cyprus should be treated on an equal footing with the European Union in that regard and people travelling by air from the United Kingdom to either Malta or Cyprus should pay only £5 in air passenger duty.
The sum involved is minimal. Some 500,000 holidaymakers from the UK go to Malta each year and a little under 1 million go to Cyprus, so the Cypriot tourist industry is suffering. To make that concession just to Malta holidaymakers would cost less than the share options to be exercised by the chairman of the National Grid. Given that this is a chance to pay a practical tribute


to the Maltese people by encouraging our citizens to go on holiday to Malta, I ask all hon. Members to vote for the amendment.

Mr. Heathcoat-Amory: I hate to disappoint the hon. Gentleman—[HON. MEMBERS: "Shame."] Actually, that is not true; I do not mind disappointing the hon. Gentleman because this is not one of his brainier schemes. In Committee, he had the idea of exempting all members of the Council of Europe from the full rate of air passenger duty. That was rejected, and I invite my hon. Friends to do the same to this amendment.
The £5 rate of duty was originally restricted to European Union countries as they are easily identifiable. That is an important consideration because travel agents and airlines around the world will have to administer the duty and distinguish between the £10 and £5 rates, so we chose the European Union as a readily identifiable group of countries. We then extended the rate to the European Economic Area because, by law, we must extend to it privileges of that nature granted to the European Union. There we must stop, however, because there is no clear case for singling out Malta and Cyprus, brave and plucky though at least one of them may have been during the second world war.
The hon. Gentleman will be pleased to know that a relief may come the way of those two countries as both have applied to join the European Union. If and when they succeed in doing so, they will qualify for the £5 rate of air passenger duty. I would rather leave it to the forces of time and history to grant them that privilege than do so this evening in the House.

Amendment negatived.

Clause 42

CARS:ACCESSORIES FOR THE DISABLED

Sir George Young: I beg to move amendment No. 58, in page 35, line 35, leave out
'designed solely for use by a chronically sick or disabled person".'
and insert
'which falls within section 168AA".'.

Madam Speaker: With this, it will be convenient to discuss also the following amendments: No. 1, in page 35, line 36, at end insert
'and also automatic transmission and power steering where those accessories are required to permit the chronically sick or disabled person to use the car.'.
Government amendment No. 59.

Sir George Young: I should like to speak briefly to Government amendment No. 59 and I hope that the Opposition will then not move amendment No. 1.
The amendments extend the exemptions included in the Finance Bill to exempt accessories for the disabled from an income tax charge when fitted to a company car. The amendments mean that exemptions will apply not just to special accessories designed solely for use by a disabled person, but optional accessories needed to enable a disabled employee to use the car where the employee is an orange badge holder because of his or her disability.
The original proposal was widely welcomed when we debated the measure in Committee, but there was a general feeling that we should go a little bit further. I have

now carefully considered whether we can respond to that feeling without running the risks that the Committee identified of giving relief for non-disabled drivers.
We have looked again at the scope for widening the range of accessories covered by the exemption while still ensuring that those items are exempt only where they are needed by a disabled person. As a result, we propose amendments Nos. 58 and 59, which will extend exemption to include optional accessories, which a disabled person needs to use the car. That means that if accessories such as automatic transmission, power steering, electric windows, air conditioning or heated seats—all of which were mentioned when we debated the proposal in Committee—are fitted to a company car at extra cost to enable a disabled employee to use that car, the extra cost of those items will not be added to the price of the car in calculating the value of the car benefit. Only those accessories that the particular disabled employee actually needs will be excluded. Where the accessory is no more necessary than for anyone else, the extra tax charge will still be due.
An employee will be eligible for the exemption if he or she is the current holder of an orange badge because of his or her disability. As my hon. Friend the Member for Bournemouth, West (Mr. Butterfill) said, the orange badge scheme was reviewed recently and the eligibility criteria were greatly tightened. The orange badge scheme was also mentioned by the hon. Member for Bristol, South (Ms Primarolo) and it operates under regulations made under the Chronically Sick and Disabled Persons Act 1970 and its Northern Ireland equivalent.
I believe that amendments Nos. 58 and 59 fully meet the concerns expressed by the Committee. I commend them to the House. I hope that amendment No. 1 will not be moved.

Ms Primarolo: I support the Government amendments. The proposals cover exactly the points that were discussed in Committee. The exemptions now provided to disabled drivers as a result of the Government's amendments mean that the discrimination that was exercised before will no longer exist.

Amendment agreed to.

Amendment made: No. 59, in page 35, line 36, at end insert—
`( ) After section 168A of the Taxes Act 1988 there shall be inserted—

Equipment to enable disabled person to use car

168AA.—(1) Equipment falls within this section if it is designed solely for use by a chronically sick or disabled person.
(2) Equipment also falls within this section if—

(a) at the time when the car is first made available to the employee, the employee holds a disabled person's badge, and
(b) the equipment is made available for use with the car because the equipment enables him to use the car in spite of the disability entitling him to hold the badge.

(3) In subsection (2) above "disabled person's badge" means a badge—

(a) which is issued to a disabled person under section 21 of the Chronically Sick and Disabled Persons Act 1970 or section 14 of the Chronically Sick and Disabled Persons (Northern Ireland) Act 1978 (or which has effect as if so issued), and


(b) which is not required to be returned to the issuing authority under or by virtue of the section in question.

(4) Subsection (12) of section 168A applies for the purposes of this section as it applies for the purposes of that."'—[Sir George Young.]

Clause 68

APPROVAL OF COMPANIES AS TRUSTS

Amendment made: No. 71, in page 60, line 19, leave out '50' and insert `30'.—[Sir George Young.]

Further consideration adjourned.—[Mr.Bates.]

Bill, as amended (in the Committee and in the Standing Committee), to be further considered tomorrow.

STATUTORY INSTRUMENTS, &c.

Madam Speaker: With permission, I shall put together the motions relating to statutory instruments.

Motion made, and Question put forthwith pursuant to Standing Order No. 101(5) (Standing Committees on Statutory Instruments, &c.),

OVERSEAS DEVELOPMENT AND CO-OPERATION

That the draft Asian Development Bank (Extension of Limit on Guarantees) Order 1995, which was laid before this House on 9th March, be approved.

That the draft Inter-American Development Bank (Eighth General Increase) Order 1995, which was laid before this House on 9th March, be approved.

That the draft Asian Development Bank (Further Payments to Capital Stock) Order 1995, which was laid before this House on 9th March, be approved.—[Mr. Bates.]

Question agreed to.

PETITION

Council Housing, Southampton

Mr. John Denham: I wish to present a petition signed by 1,000 council tenants in Southampton, which is headed by David and Rashin Bishop of 2 Kenilworth house. They are in their fourth year of waiting for a larger home for themselves and their three children. They cannot understand why they have to wait so long while the city council has £14 million from the sale of council houses, which cannot be used to build new homes.
The petition reads:
To the Honourable Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled.
The humble Petition of residents of Southampton sheweth that:
Local authorities are prevented from using the money raised from the sale of council housing to build new homes.
Wherefore your petitioners pray that your humble House will:
Urge Her Majesty's Government to enable Southampton and other local councils to use capital receipts to build new homes, improve existing homes and create useful work.

To lie upon the Table.

Official Report

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Bates.]

Mr. Patrick Thompson: I am grateful for the opportunity to initiate this evening's Adjournment debate about Hansard and related issues. I am especially grateful to my hon. Friend the Parliamentary Secretary, Office of Public Service and Science, for being here to reply to the debate and I look forward very much to hearing what he has to say. I am also pleased to see my hon. Friends the Members for Croydon, North-East (Mr. Congdon) and for Carshalton and Wallington (Mr. Forman) in the Chamber, and I hope that they will take an interest in the matter.
Hansard is essential to the work of Members of the House. It is also highly important to our constituents, who need to know what right hon. and hon. Members say in Parliament. The dramatic fall in Hansard's circulation in recent years, the decline of parliamentary reporting and the lack of in-depth coverage of the House's proceedings in the press have together significantly weakened the working of democracy in this country.
I am especially pleased to start the debate as a Member for a Norwich constituency. It was in Norwich that Luke Hansard was baptised and where he served his apprenticeship to a printer before coming to London in 1774. Here he became one of the commercial parliamentary printers contracted to Mr. Speaker to publish the papers of the House. Those were straightforward papers—the journal, votes and Bills—necessary for the work of the House. What was said by Members in debates continued to be regarded as confidential and strictly reserved for the ears of other Members. I suspect that there may be occasions nowadays when the thought crosses the minds of some right hon. and hon. Members that it might be better if that continued to be so.
It was not until the first decade of the 19th century that unauthorised verbatim accounts of proceedings by William Cobbett began to appear. From 1807 onwards, those were published by Luke Hansard's son Thomas, who took over the whole operation from 1812. Since that time, the name Hansard has been synonymous with the publication of a clear and independent record of the proceedings in the Chamber and in our Standing Committees. It is a tribute to the achievements of the Hansard family, of Her Majesty's Stationery Office and of its highly proficient staff for many decades that the title Hansard has been adopted for the reports of proceedings in other legislatures throughout the world.
Norwich's historic connection with Hansard was reinforced in 1968, when HMSO transferred its headquarters from Atlantic house in Holborn to Norwich. I take the opportunity to pay tribute to the work of my constituents and others in Norwich who work in the HMSO organisation. I thank also those members of staff at HMSO who have helped me in preparation for the debate.
It is in HMSO's parliamentary data centre that the copy sent from the Hansard editorial staff here is converted from continuous text into columns and pages, scanned for quality control and delivered in hard form to HMSO's parliamentary press for printing, finishing and distribution


the following morning. I do not know whether I am allowed to pay tribute to those who are present taking down the proceedings right now, verbatim, at the same time as I am referring to other people associated with Hansard. Written answers have to be typeset before being converted into columns and paginated, while proceedings in Standing Committees also require typesetting.
Getting Hansard to our breakfast tables is therefore a complicated and costly operation. It is an operation that I believe is essential to the workings of democracy in Britain. The electors who send right hon. and hon. Members to represent them here are entitled to know what decisions we have taken and why. The arguments that we have made to one another, the challenges that we have made to Ministers and their responses, the votes that we have recorded, all belong in the public record. That information makes us truly accountable to one another in the House and should make us accountable to the wider public, beyond these walls.
Unfortunately, access to information about the proceedings in the House and the reasoning behind parliamentary decisions has become more restricted. Sixteen years ago, Hansard had a circulation of 10,500 copies, covering proceedings in both Houses. Now, its daily sales are of about 5,500 copies, and most of those—some 85 per cent.—go to officials and Government Departments, with the remainder going to institutions and corporate bodies. Many public libraries, academic institutions and individuals have ceased to take Hansard altogether.
There can be no doubt that the major reason for the decline in the circulation of Hansard has been its pricing policy. In 1979, Commons Hansard cost 45p. By 1983, that had more than trebled to £1.50. Now it is £7.50. The Hansard for the other place costs £4.20. Few public or academic libraries can afford to pay nearly £12 a day to learn what happens here.
I understand that the decision was taken in 1983 to withdraw the subsidy of £6 million a year which HMSO was then receiving to support the publication of Hansard. That process was completed in 1992. No announcement of that decision was, so far as I can discover, ever made in the House. Right hon. and hon. Members never had the opportunity to express their views on its merits or on its inevitable consequences. It is interesting to note that the hon. Member for Newham, South (Mr. Spearing) tabled a written question on this matter in November 1993. The figures that he obtained confirm the information that I have given in this debate.
It is not acceptable for the citizens of this country to have to pay seven times what Americans and Germans pay for finding out what happens in their legislatures, eight times what Canadians and French people pay and 14 times as much as Australians have to pay.
The fall in the circulation of Hansard has been compounded by the changes in parliamentary coverage in the press. Twenty-five or 30 years ago, the quality broadsheets, if not the tabloid press, gave proceedings in this House much more coverage than they do now. I know that that is true because I took the opportunity to do a certain amount of research into this subject some six months ago. The Times, for example, some years ago, quoted directly from the speeches of right hon. and hon. Members in some detail. It is very rare indeed for it to do so now. The quality press now prefers to produce the

diaries of parliamentary sketch writers. Serious reporting has given way to a preoccupation with knockabout comedy and juvenile witticisms.
Of course I accept that there are programmes on the radio and television which are specifically devoted to covering parliamentary proceedings. That is all to the good, but they cater for people with specialised interests, not for the general run of viewers, whose attention—or perhaps that of news editors seeking spectacular rows—is aroused only for snippets of debates in the House or in Committee which are carried on the main news bulletins.
It is no good complaining of course about the preferences of the broadcasting media or of the newspapers. They have their own agendas and rightly so. The House must make its own views felt, at least on the issue of Hansard, in which we have a locus.
Hansard should be more readily available. That means lowering its price, if necessary by subsidising it from parliamentary rather than Government funds. The House should consider whether copies of Hansard should be supplied to the major public libraries throughout the United Kingdom at a price equivalent to the marginal cost of production. That would make it readily accessible to a very large number of people whenever they needed to discover what the House had heard, decided and done.
Why should Hansard not be available, for example, on the Internet, perhaps at a modest charge to subscribers?

Mr. David Congdon: My hon. Friend was talking earlier about cost, which is an important factor as, indeed, is accessibility. Does he agree that if Hansard were put on the Internet, it could possibly be made available more cheaply and—perhaps even more beneficially—made far more accessible to people?

Mr. Thompson: I certainly accept my hon. Friend's point. I know also that my hon. Friend the Member for Dover (Mr. Shaw) is particularly interested in the information being available on the Internet, and cheaply. If electronic communication represents the future, the representatives of the people of this country should be among the first, not the last, to use it.
Parliament is the linchpin of democracy in Britain. In this Chamber and in another place, the range and scope of the laws and regulations that people have to obey is continually being extended. Their continuing consent depends on their ability to scrutinise the activities and decisions of their Members of Parliament. That has become harder in recent years. It should—it must—become easier in the future.

Mr. Nigel Forman: I strongly endorse what has been said by my hon. Friend the Member for Norwich, North (Mr. Thompson), who has put a powerful and well-researched argument to the House. I hope that the Minister will pay particular attention to his implicit suggestion that the subsidy should be restored to Hansard so that it can be made available to the general public, libraries and others at a more competitive price which is more akin to the price in other countries. And if money needs to be found for that purpose—if it is not possible or tenable to find it from Exchequer sources—we should look to Parliament's own revenue-generating capacity. As I understand it, the Kiosk and one or two other places here make a handsome profit;


perhaps we should look to them to find the necessary subsidy that would enable us to bring Hansard to the attention and use of a much wider public.

The Parliamentary Secretary, Office of Public Service and Science (Mr. John Horam): I am grateful to my hon. Friend the Member for Norwich, North (Mr. Thompson) for drawing attention to an issue that is of concern to both sides of the House. It was fascinating to hear of the links between Norwich, Hansard and its printer and publisher, HMSO. As we know, Norwich is a fine city, and HMSO is not the least fine of its occupants. Indeed, this very morning I was extolling its excellent recent progress to a conference on pay and grading delegation in the public sector.
My hon. Friend has raised important issues, focusing on the premise, with which I very much agree, that Members of the House must be properly accountable to their constituents; and that the people of this country must have the opportunity of following what goes on here and what Members say in Parliament. That principle is at the heart of our democratic system of government.
I too regret the increasing tendency in the press to trivialise our proceedings, and I believe that Parliament should be covered more thoroughly and seriously by the media. I was impressed by the way my hon. Friend collected his information on that subject.
I also believe that Hansard is an essential and high-quality service. The service provided to the House by the Editor of debates, in collaboration with HMSO, matches the best in the world. Many legislatures manage to issue their record of proceedings only some days after the event. Obviously costs, and therefore the cover price, could be substantially reduced if hon. Members were prepared to contemplate a diminution in the standards to which we have become accustomed. But I do not favour going down that route; nor do I believe that such a move would attract significant support anywhere in the House.
In order to guarantee the breakfast-time delivery of the previous day's proceedings, HMSO has made a heavy investment in plant and equipment in central London, which is costly to maintain. The facilities are fully stretched each night when Parliament is sitting but cannot be used to full capacity at other times, particularly during the recesses.
To deal with this problem the Government are introducing a new arrangement in the 1995–96 estimates, permitting HMSO to seek non-Government work to fill spare capacity. I am hopeful that that will lead to the more effective use of HMSO's facilities and thereby spread the fixed costs of the installation over a wider base. That, I hope, will lead to the lower costs with which my hon. Friend is concerned. It will be one more step in a progressive programme of service improvements and cost reduction.
Following investment authorised by a Committee of the House, for example, the Editor of debates has, for more than a year, been providing copy to HMSO in electronic form, instead of typescript and manuscript. That eliminates the need for typesetting and it has opened the way to substantial savings in production costs.
At the same time, HMSO has subjected its Hansard printing operations to the full rigours of competitive market testing—an exercise which has demonstrated that there are no private sector printers capable of producing Hansard more cheaply or efficiently. The successful in-house bid has led to the rationalisation of production facilities and improvements in productivity.
A second market test—of the keyboarding of written answers—led to another innovative in-house bid by HMSO that resulted in new investment in modern data technology and much greater cost-effectiveness. New proposals for changes in the pattern of working at the Parliamentary Press, that will further improve productivity, are under discussion with union representatives.
The desire of my hon. Friend the Member for Norwich, North to see an increase in the circulation of Hansard is, I am sure, understandable, strong and widely shared. It is so strong that he is prepared to contemplate the reintroduction of a general Hansard subsidy or wider recourse to differential pricing, with parliamentary and Government users paying a higher price than external purchasers, such as public libraries.
That raises two questions: is subsidy the most desirable way of keeping costs to the customer under control; and would a general subsidy lead to a marked increase in the readership of Hansard among our constituents? My hon. Friend rightly observed that Hansard is no longer heavily subsidised by the taxpayer, as it was until only a few years ago. As my hon. Friend said, at its peak the subsidy was as high as £6 million a year. At that time, circulation was nearly twice what it is now.
I remind the House that the present cover price of £7.50, which finally eliminated the need for general subsidy, was introduced as long ago as November 1991. There has been no increase in the past three years, and I am pleased to tell the House that HMSO has pledged that there will be no increase during the life of the present Parliament. That amounts to a five-year price freeze, which is all the more remarkable given the continuing increases in the price of paper, which alone have added about £1 million to production costs over the period to which I have drawn attention.
Ever since the general subsidy was eliminated, HMSO has been funding from its overall revenues the heavy investments in new equipment, rationalisation and relocation to which I have referred. As a result of these investments and action by the House, there is a real prospect that the publication of Hansard will become profitable in 1996, for the first time ever.
It may therefore be possible to go one better than a price freeze. I am pleased to tell the House that HMSO is discussing with House officials the possibility of a price reduction. These discussions are not sufficiently advanced for me to go into more detail tonight, but I understand that the issues concerned will be brought before the relevant House Committees in the near future.
As you know, Madam Speaker, since April 1992 the House has taken financial responsibility for its stationery and printing needs, including Hansard. The House authorities, principally the Commission, chaired by you, Madam Speaker, and advised by the Administration Committee, chaired by the hon. Member for Glasgow, Springburn (Mr. Martin), are therefore actively involved


in any decision on the future pricing of, or distribution policy for, Hansard. That means that the House has a role in the pricing of Hansard.
I remind my hon. Friend the Member for Norwich, North that the Government still provide a subsidy that enables HMSO to supply Government publications to public libraries at half price. I do not think that that is generally known. That subsidy applies both to Hansard publications, which are already slightly discounted, and to the bulk supply terms offered by HMSO for those who take omnibus collections of publications. That means that members of the public throughout the country are able to consult Hansard and other Government publications in libraries, which have been supplied at prices ranging from only 25 per cent. to 45 per cent. of face value. That can be a reduction of 75 per cent. That is a real public benefit, which makes a practical contribution to promoting open government, and which represents a base on which I would be prepared to build. I think that these arrangements go some way to meeting my hon. Friend's laudable objectives. Indeed, if my hon. Friend takes into account all the discounting that can happen both on the weekly Hansard and on the daily Hansard, he will find that it comes very close to the marginal costs that he mentioned.
I have already mentioned that during the many years when Government provided a substantial subsidy, the circulation of Hansard was, nevertheless, modest. Regrettable though hon. Members may find it, sales of Hansard to the general public have always been extremely small. As my hon. Friend has said, no less than 85 per cent. of sales are to official users—Government Departments and so forth—and the remaining 15 per cent. largely comprise libraries and other institutions and commercial organisations, rather than individual citizens. Circulation among individuals is not very different now, with a price of £7.50, from what it was when the price was 45p. The reduction in sales over the past 10 years or so, to which my hon. Friend referred, has come about mainly as a result of fewer sales to Government Departments. I read nothing into that; that is the fact of the matter.
It is certainly true, as my hon. Friend observed, that many overseas legislatures publish their official report at lower prices—sometimes considerably lower where a subsidy applies. However, despite these lower prices, very few countries manage to sell more copies of their official report than does the United Kingdom. Indeed, one legislature that makes its proceedings available free of charge has almost the lowest public readership of all.
This apparently perverse logic may be explained by the results of some market research which was undertaken by MORI last year, under commission from HMSO. MORI found that although most members of the general public were aware of the existence of Hansard, there was much less interest in reading it in its present form whatever the price might be.
I normally reserve a healthy scepticism for the results of public opinion polls, but I have to confess to an uncomfortable feeling that there may be something in the proposition that although the average citizen no doubt wishes to keep abreast of the main elements of parliamentary business and might well want better newspaper coverage, as my hon. Friend said, he or she may be rather less interested in a verbatim transcript—which is what Hansard is—of our proceedings.
As my hon. Friend said, radio and television programmes devoted to parliamentary proceedings cater for a small and specialised market. I think that most hon. Members will agree that Hansard inevitably falls into the same category.
MORI's other findings included the fact that more than half of present subscribers regarded Hansard as being either "very good" or "fairly good" value for money. In fact, most users of Hansard were less concerned with the cover price than with the cost of employing people to go through its pages to find the issues of interest to them. The obvious conclusion to be drawn from this is that the presentation of information that follows the exact order of business in the House is, in practice, not very user-friendly—at least for people who are not Members of the House of Commons.
MORI's overall conclusion was that the market for Hansard as a complete publication in its present verbatim form is, therefore, extremely limited, although the market for some of the information it contains is potentially large. What is needed, therefore, is a means of extracting bespoke information relevant to the needs of individual users and presenting it to them either electronically or by printing on demand. Most users would be prepared to pay more for such a service than they pay for the present Hansard. The point is that there would be an opportunity to generate more revenue and, therefore, the possibility of reducing further the price of Hansard if we could achieve such a bespoke information source.
My hon. Friend also mentioned the attractive possibilities now opened up by the Internet with its potential for fast transmission of information to a wide audience. My hon. Friend the Member for Croydon, North-East (Mr. Congdon) also commented on this. HMSO is exploring these possibilities, in conjunction with the House authorities. But it needs to be borne in mind that a continuous stream of undifferentiated data is no more user-friendly on screen than it is on paper so there will be a need for careful presentation. As my hon. Friend the Member for Croydon, North-East said, the key is to make the information more accessible. That would require us to put in sophisticated software to make Hansard as user-friendly on the Internet as we would wish it to be.
HMSO now publishes Hansard in CD-ROM form. This enables the proceedings of a complete Session of Parliament, amounting to some 20 million words, to be captured on a 5-in disc. The sophisticated retrieval software of CD-ROM allows users to look up within seconds what any hon. Member has said on any given subject at different points in time and for a long period. That is a sobering thought, but such technology clearly has the potential to meet the needs of Hansard's customers very effectively. I know that HMSO and the House officials will continue to work to develop service improvements to meet those needs and to ensure that Hansard continues to play a central role in the life of parliamentary democracy.

Question put and agreed to.

Adjourned accordingly at twenty-six minutes to Eleven o'clock.